BniliBencb v. Nagpur-(M.S-)

ORDER \ Postfor-Sl -10-2013 Sd/- Sanjay K. Agrawal Judge 30-10-2013 HIGH CQURTOF CHHATTISGARH Desianated Judae under Section 11(6) of the Arbitration and Conciliation Act. 1996 : Hon'ble Shri Justice Saniav K. Aarawraj Arbitration ApDlication No.37 of 2012 Applicant M/s Teja Electricals versus Non-Applicant General Manager, South East Central Railway ArbitrationADDlication No.38 of 2012 Applicant M/s Teja Electricals versus Non-Applicant General Manager, South East Central Railway Arbitration ApDlication No.39 of 2012 Applicant M/s Teja Electricals versus Non-ApDlicant General Manager, South East Central Railway Arbitration ApDlication No.40 of 2012 Applicant M/s Teja Electricals versus Non-Applicant General Manager, South East Central Railway ApDlications underSection 11(6) of the Arbitration and Conciliation Act. 1996 }^ Appearances of the counsel in all the ApDlications: Shri Prafull Bharat, learned counsel forthe applicant. Shri H.S.Ahluwalia, learned counsel forthe non-applicant. ORDER (Passed on 31 October, 2013) (1) This order shall govern the disposal of Arbitration Applications No.37, 38, 39 and 40 of 2012 as the question of law involved in all the four applications is one and^the same. However, for the sake of convenience, Arbitration Application No.37 of 2012 is taken-up as the lead case. (2) All the four arbitration applications are filed by applicant M/s Teja Electricals under Section 11(6) of the Arbitration and Conciliation Act, 'the Act, 1996') seeking appointment of an arbitrator 1996 (henceforth in terms of agreement dated 4-10-2006 entered into between the applicant and the non-applicant. (3) Facts leading to filing of the lead case, i.e., Arbitration Application No.37 of 2012 may briefly be noted thus: (3.1) The applicant is the sole proprietor ofM/s Teja Electricals having its office at Nagpur (Maharashtra). The non-applicant South East Central Railway invited a tender for replacement of 132 KV and 25 KV Oil Type Circuit Breakers and Interruptors Enhancement of 25 KV Capacitor Bank and upgradation of Urkura TSS over Raipur Division. Pursuant to the tehder floated by the non-applicant/Railway, applicant made an application for award of the contract and ultimately the work was awarded to the applicant. An agreement was entered into and the agreement being contract No.15/CEE/CON/SECR/BSP/2006 BB' was executed between the applicant and the non-applicant on 4-10- 2006 and the approximate value of the contract was ?1,09,32,532/-. The agreement stipulates that the general conditions of the contract , and the special conditions specification of works and memorandum of measurements of the schedule of labour and materials revised edition 1994 will form part of the agreement. (3.2) It was further pleaded that the said work awarded to the applicant by the non-applicant was completed on 10-10-2011 and thereafter the applicant submitted an application to the non-applicant for making payment of the final bill vide Ex.A-2 dated 10-10-2011 final bill of ?13,47,430/-, which was replied by the non-applicant vide Annexure A- 3, but payment was not made leading to the issuance of arbitration notice dated 3-5-2012 (Annexure A-3) by the appticant to the non- applicant stating that final bill pertaining to the contract agreement has not been paid, therefore, as per terms and conditions of the contract arbitrator be appointed to sort out the dispute ofreceipt ofthis letter. The non-applicanVRailway by its letter dated 8-5-2012, simply informed to the applicant that the matter has been forwarded to the Executive (PHOD) of the concerned department for the remark/appointment of an arbitrator and the views of the Railway will be informed to view accordingly. Finally the non-applicant/Railway, by its tetter dated 27-6- 2012, informed to the applicant that no dispute exists between the parties and the final bill amount and the security deposit can be paid on advice from the Central Railway and further informed that since no dispute exists your request for appointment of an arbitrator cannot be processed. On failure, the applicant has filed this application for \lfc appointment of arbitrator under Section 11(6) of the Act, 1996 on 30-8- 2012 stating that the non-applicant has failed to appoint the arbitrator as arbitration agreement between the parties and prayer has been made to appoint a sote arbitrator in exercise of power under Section 11(6)oftheAct,1996. (3,3) The non-applicanVRailway has filed reply to the aforesaid application before this Court stating inter alia that there is no dispute about the final bill amount and the security deposit it has been kept in abeyance as per Clause 52A of the General Conditions of the Contract which provides that the contract shall have no claim for interest or damages whatsoever on this count or on any other ground in respect of any sum of money withheld or retained under said clause and further pleaded thatvide letter dated 22-2-2013, the Central Railway.Nagpur has informed to the Railway, Bilaspur that in other two contracts having number Nagpur TDC T 98-99 2007 dated 24-12-1998 an agreement number Nagpur TDC T 23/4 dated 4-7-2002 a sum of ?2.07 Crores is recoverable from the applicant and, therefore, there is no arbitral dispute regarding the claim made by the applicant and by virtue of Clause 52A of the General Conditions of the Contract, the non- applicant/Railway is not able to make payment of the said claim of the applicant and the appointment of a arbitrator would be futile exercise and would also submit that the claim made by the applicant falls within the definition of 'excepted matters' as defined in Clause '63' of the General Conditions of the Contract and thus, the application is liable to be rejected.

4. Shri Prafull Bharat, learned counsel for the applicant would submit that there is a valid and enforceable arbitration agreement in terms of Section 7(1) of the Act, 1996 and in which the applicant was a party and the applicant has approached the appropriate High Court and there is arbitral dispute between the parties. He would further submit that the applicant has served a notice dated 3-5-2012 (Annexure A-3)in accordance with the arbitration clause for appointment of an arbitrator, which the Railway did not respond properly and failed to make r appointment of an arbitrator andr4hereafter, the Railway, only on 27-6- 2012 (Annexure A-5), informed the applicant that no disputeexists. He would further submit that claim of the applicant does not fall within the category of "Excepted Matters". Hence, the instant application for appointment of an arbitrator under Section 11(6) of the Act, 1996 deserves to be allowed.

5. Per contra, Shri H.SAhluwalia, leamed counsel for the non- applicant/Railway would submit though there is an arbitration agreement between the parties, but there is no arbitral dispute existing between the parties as the claim raised by the applicant falls within the purview of "Excepted Matters" and, therefore, the application for appointment of an Arbitrator deserves to be dismissed.

6. I have heard and considered the rival submissions and have perused the papers available.

7. Having regard to the pleadings and submissions made by the parties, the following questions arise for consideration: (i) Whether there exists a valid and enforceable arbitration agreement between the parties and the applicant has approached appropriate High Court? (ii) Whether the claim made by the applicant is an FT "Excepted Matter" as provided in Clause 63 of the General Conditions of the Contract and excluded from arbitration? (iii) Relief,if any? Answer to Question No.(i):

8. Para 3 of the General Conditions of the Contract is standard general condition of the contract for use in connection with engineering works. Clause 64(1 )(i) thereof provides for demand for arbitration. "64(1 )(i). Demand for Arbitration.— 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 matters, shall demand in writing that the dispute claim on disputed or difference be referred to arbitration. The demand for arbitration shall specify (ii) the matters which are in question or subject of the dispute or differenceas also the amount of claim itemwise. Only such dispute(s) or difference(8) in respect of which the demand has been made, together with counter claims or set off shall be referred to arbitration and other matters shall not be included in the reference." ^

9. By agreement (Annexure A-1) dated 4-6-2010 executed between the parties general conditions of the contract and special conditions specification of the work and memorandum of schedule of labour and materials has been made form part of the agreement which provides for demand for arbitration. The existence of aforesaid arbitration clause as contained in the General Conditions of the Contract has not been disputed by the non-applicant/Railway in the instant case and on the other hand, it has clearly been stated that there is no dispute regarding existence of arbitration agreement between the parties, therefore, light of the arbitration clause provided in the General Conditions of the Contract which is a part of agreement dated 4-10-2006 entered into between the parties, and in view of said fact having not been disputed by the non-applicant/Railway, 1 hold there is valid and enforceable arbitration agreement as provided under Section 7(1) oftheAct, 1996 between the parties in which the applicant and the non-applicant both are parties and the applicant has made a request for appointment of an Arbitrator under Section 11(6) of the Act, 1996. Question No.(i) is answered accordingly. Answer to Question No.(ii):

10. In order to adjudicate to second question, a brief survey of Section 52-A of the General Conditions of the Contract is necessary. Sectioh 52-A of the General Conditions of the Contract runs thus: "52-A. Lien in respect of claims in Other Contracts.— Any sum of money due and payable to the contractor (including the security deposit returnable to him) under the contract may be withheld or retained by way of iien by the ¥/ / Railway, against any Claim of this or any other Railway or anyother Department ofthe Central Government in respect of payment of a sum of money arising out of or under any other contract made by the contractor with this or any other Department of the Central Government. It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Railway will be kept withheld or retained a such by the Railway till the claim arising out of or under any other contract arbitration, is either mutually settled or determined by if the other contract is governed by arbitration clause or by the competent court as the case may be and contractor shall have no claim for interest or damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the contractor."

11. The non-applicant/Railway relying upon Section 52-A of General Conditions of the Contract as claimed that since an amount of ?2.07 Crores is recoverable from the applicant in two other contracts and it is an agreement term of the contract that sum of money so withheld or retained under this clause by the Railway shall be kept withheld till the claim arising out of order under any other contract is mutually settled or determined by the arbitration. Thus, submissions of the non-applicant/Railway, in sum and substance, relying upon Clause 52-Aofthe General Conditions ofthe Contractare that— The claim made by the applicant does not fall within (i) the "arbitration clause" being within the authority of Railway and "Excepted Matter", and (ii) On merits, the applicant is not entitled for the claim involved in the arbitration.

12. ln Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra and another, (2012) 2 SCC 144, the Supreme Court held as under: "12.