High Court · 2009

3. In the background of the above mentioned facts the petitioner is sued a letter dated 4-10-04 to the respondents claiming additional amounts on ac count of the cost escalation. The claim of the petitioner was denied by the 3rd respondent herein by his letter 10-10-04. Subsequently on a similar request by t he petitioner to the 2nd respondent the 2nd respondent denied the liability of t he respondents to make such extra payment by his letter dated 18-11-04. Upon rec eipt of the said letter the petitioner by his letter dated 30-12-04 requested th e 2nd respondent to refer the above mentioned claim of the petitioner for paymen t of money on account of escalation of prices for arbitration. The 2nd responden t by his letter dated 20-1-05 declined to refer the matter for arbitration. Once again on 14-3-05 the petitioner demanded reference of the a 3. bove mentioned dispute for arbitration As there was no response from the 2nd res pondent the petitioner approached the 5th respondent with the same request. The 5th respondent by his letter dated 18-11-05 called upon the petitioner to submit further information regarding the claim, the details of which may not be necess ary for the present purpose. Such further information was submitted by the petit ioner on 13-12-05. 4. Further, the petitioner also addressed a letter to the 4th respo ndent informing him that if a favourable decision on referring the dispute for a rbitration in the background of the correspondence mentioned above is not taken within a period of three weeks from the date of receipt of the letter dated 24-5 -06 the petitioner would be constrained to approach this court seeking appointme nt of an arbitrator. In response, the petitioner received a letter dated 11-7-06 from one of the officers of the respondent organization, that is, Central Water Commission, to furnish some information for further examination. It is the case of the petitioner that on 15-7-06 such information was also furnished by the pe titioner. Nonetheless the respondents did not chose to refer the dispute to arbi tration and hence the present petition.

5. Respondent Nos.1,2 and 3 are served and represented by Dr BP Tod i, learned senior counsel. The respondents have filed an affidavit contesting th e present petition. The substance of the contest of the respondents is that the extension of time for executing the contract by the petitioner was granted on co ndition that the petitioner would not be entitled to make any claim for payment other than the one agreed upon by the original contract and, therefore, it is su bmitted by the learned counsel for the respondents that there is no live issue b etween the parties for being referred to arbitration.

6. In this context the learned counsel for the petitioner relied up on a judgment of the Supreme Court reported in (2009) 1 SCC 267 (National Insur ance Company Limited vs. Boghara Polyfab Private Limited) wherein the Supreme Co urt categorized the issues that fell for consideration of the Chief Justice or h is nominee in an application U/s 11 of the Arbitration and Conciliation Act, int o three classes They are- (cid:28)Category I Issues are: (a) Whethere 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, Category II Issues are: Whether the claim is a dead (long-barred) claim or a live claim. (a) (b) Whether the parties have concluded the contract/ transaction by recordin g satisfaction of their mutual rights and obligation or by receiving the final p ayment without objection. Category III Issues are: (a) Whether a claim made falls within the arbitration clause (as for example , a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (b) Merits or any claim involved in the arbitration. (cid:29) Regarding the nature and scope of the proceedings before the Chief Justice or hi s nominee in an application like the present one on the above mentioned issues t he Supreme Court held as follows:- (cid:28)22. Where the intervention of the court is sought for appointment of an Arbitra l Tribunal under Section 11, the duty of the Chief Justice or his designate is d efined 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 i nto three categories, that is (i) issues which the Chief Justice or his designat e is bound to decide; (ii) issues which he can also decide, that is, issues whic h 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: (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 appl ied 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 choo se 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 sa tisfaction of their mutual rights and obligation or by receiving the final payme nt without objection. 22.3 The issues (third category) which the Chief Justice/his designate should le ave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and exce pted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. (cid:29)

7. On the other hand the learned counsel for the respondents Dr Tod i relied upon a judgment of the Supreme Court reported in (2007) 4 SCC 599 (Shre e Ram Mills Ltd vs. Utility Premises (P) Ltd), more particularly para 28. I am o f the view that these two judgments do not lay down anything which is consistent with each other.

8. Insofar as the first category of the issues are concerned I am b ound to adjudicate upon whenever the need arises. It is admitted case of both th e parties that the issues falling in the first category do not arise for adjudic ation in the present case, as neither the jurisdiction of this court nor the exi stence of the arbitration agreement between the parties to this proceeding is in dispute. The case of the respondents is that the objection such as the one rais ed by the respondent indicated above is the one which falls in the second catego ry indicated by the Supreme Court in the 2nd of the above mentioned decision, th at is, whether the claim is live or not. The Supreme Court observed as follows : - (cid:28)27. & &The Chief Justice has to examine as to whether the claim is a dead one or in the sense whether the parties have already concluded the transaction and h ave recorded satisfaction of their mutual rights and obligations or whether the parties concerned have recorded their satisfaction regarding the financial claim s. In examining this if the parties have recorded their satisfaction regarding the financial claims, there will be no question of any issue remaining. It is i n this sense that the Chief Justice has to examine as to whether their remains a nything to be decided between the parties in respect of the agreement and whethe r the parties are still at issue on any such matter. If the Chief Justice does not, in the strict sense, decide the issue, in that event it is for him to locat e such issue and record his satisfaction that such issue exists between the part ies. It is only in that sense that the finding on a live issue is given. Even at the cost of repetition we must state that it is only for the purpose of findi ng out whether the arbitral procedure has to be started that the Chief Justice h as to record satisfaction that their remains a live issue in between the parties . (cid:29)

9. The decision of the Supreme Court in (2009) 1 SCC 267 referred to above makes it clear that it is open to the Chief Justice or his designate ei ther to decide such an issue or leave it to the Arbitral Tribunal. Even the deci sion relied upon by the respondents recognises this discretion in the Chief Just ice, as can be seen from the above extract. All that the said judgment obligates the Chief Justice is to record his satisfaction that there is a live issue. In the said context, what is required is to verify whether the contract is executed and parties have recorded satisfaction of their mutual rights and obligations. No such categoric recording of the satisfaction of the mutual rights and obligat ions is placed before me. On the other hand the learned counsel for the responde nts submits that that the very documents by which the extension of time was gran ted to the petitioner for executing the contract clearly indicates that the peti tioner is not entitled to make any further financial claim. I am not examining t he exact tenor of such a condition nor the true purport of that condition and th e consequential legal implications. Assuming for the sake of argument that such a condition does exist the issue is what is the legal effect of such a condition and such an examination is totally different from the issue of examining whethe r the parties have recorded satisfaction of their mutual rights and obligations. Satisfaction of mutual rights and obligations is a question which arises on the execution of the contract. The condition such as the one said to be relied upon by the respondents is a condition which was brought into existence during the c ourse of execution of the contract and, therefore, in my view is not one of the factors covered by the decision rendered in (2009) 1 SCC 267. For the above mentioned reasons, I am of the opinion that the applicatio n is required to be allowed. Accordingly the application is allowed referring th e dispute, mentioned above, between the parties to arbitration. In the circumsta nces I deem it appropriate that the above mentioned dispute be resolved by Mr Ju stice DN Chowdhury, a former Judge of this Court.

10. The application is allowed, as indicated above.