The High Court · 2025

Order

Hearcl Sri ) Narendra Reddy, leamed counsel for ttLe Aoplicant, and Sri P. Sri F a :,ha Reddy, leamed counsel lor the Respondcnts

2. 1'he llle ,'nt Arbitration Application is filed uudt:r Sr:ction 11 (5) and (6) of rh .A.rbitration and Conciliation Act, i996 (he reinafter 'the Act, 19!)()') rr appointment of a sole arbitrator to aJ.iudicate the disputes betri,,:r:r he parties as contemplated under Clausc I . 11 ol the Finn Orde: rlrrrr: L i9.09.2016 issued by respondents in 1'a;oirr o1'the Applicant. FACTS:. 3 . 1 " r :s :,ondent is a company engaged in coal mirring activities. .Ap,r ir r ut is also a company engaged in rnininlr ('ontracts. 1't responderLt lra ; jssued a tender vide Enquiry No. E121liC0it'72 dated

13.05.2016 1br tr , nork of selective extraction of 63.182 l-BCM coal in Pit-tII (PaLrt..r and Pit-I (Part-B) with Surface Miner '['e,.;hnology including loarljn: transportation and dumping at Koyagu,Jern OC-ll, Yellandu arerr t ) be completed in 36 months. The Applicant has participated in Ir': process and was declared as succes:,ful bidder. 1 qrrc''ffiE&+;+!..*. o 2

Thereafter, l't respondent has issued Firm Order No. 7600006595 dated 19.09.2016. The total value of the work awarded to the Applicant was Rs.52,64,39,070.17 (exclusive of Service Tax). In terms of the Order dated 19.09.2016, the Applicant fumished the Performance Security in the form of the Bank buarantee for Rs. 79.00 Lakhs. The Applicant completed execution of the work and signed various statements pertaining to the Final Bill No.70 (Oct-21), such as coal quantity, calculation of diesel price variation etc, pursuant to which, 3'd respondent vide letter dated 11.03.2021 informed the Applicant that net payable amount under Final Bill No.70 after necessary deductions is arrived at Rs.89,83,833.69 and recommended for payment. In terms of the said Order, the Applicant submitted Tax Invoice for Rs.92,58,448.69, inclusive of GST to enable the respondents to release Final Bill amount to it.

4. Vide letter dated 19.04.2021, 3'd respondent informed the Applicant to submit GST lnvoices as Rs. 14,48,509/- with respect to the Final Bill and confirmed the excess payment paid by SCCL of Rs. Rs.1,45,68,717l-, 2nd respondent also requested the Applicant to sign Final Bill and to submit invoices as per Telangana Goods and Services Act, 2017 ( GST Act). 2nd respondent has also issued a revised .rrrrr.a-- - -:-t'@;}r ' --, .: '!."t t- e 3 calculation ',, r|: :tter dated 02.05.2021 revising the nr:girlive bill amount to F-s .i.1,81,824.73. The Applicant had subrnirted Tax Invoices datt:r1 -l t')3.2021 for Rs.17,09,241.41 and a cre<li'. n,lte dated 3t.03.202\ :( )r ks.|,67,34,5521- and also a credit ttote for Rs.92,58,44!lr- ;,de letter dated 12.05.2021, Applicant -equ:sted the respondenls tc lr.nish a copy of letter dated 23.02.2021 wl.rich was refemed in th: I, tter dated 25.04.2021 to the respondent Virle letters dated 20.04:(rl2 I and 25.06.2024 of the respondents <lemitnded an amount o1'lis. 83,64,1501- for settlement of Final Ilitl lrom the Applicant. Jlesl r11dsn15 also informed the Applicanl thrLt if the Applicant fai s t r ray the said amount, it will invoke Banlr ( iuarantee and recover th, bills pertaining to other works exet:uter.l by the Applicant. F!::;p r.Ldents also demanded for extending validjt)' ol the Performance c,f ]ank Guarantee. Vide letter dated 22.04.'..1024. the Applicant obit:c i',J to the said claim made by the respc ncrerrt No.2 made in the lt{te dated20.04.2024

5. Applir: rrt has again demanded the respondents io fumish a copy of demarrl l,:tter dated 23.02.2021. Vide letter date'|06,06.2024, 2nd respondr:n1 1rr',ze break up for Rs.1,83,64,1501- which slLows that an amount ol- .r s. 1 ,41,81 ,825/- is recoverable towarrls I inal Bill 4 amount of Rs.25,52,7 28l- towards GST at the rate of I 8oZ on C Rs.1,41,81,8251- and Rs.32,78,390/- recoverable towards costs of explosives. Vide letter dated 08.06.2024, the Applicant objected claim of the respondents as being unjustified and contrary to the terms of NIT. 2nd respondent had issued a Ietter dated 19.06.2024 to the General Manager, Bellampally area of SCCL, without any reference to the letter dated,23.02.2021 of the Applicant and referring to the letter dated 23.02.2021, requested the General Manger, to recover an amount of Rs. 1,67,34,5521- from the running bills of the Applicant.

6. Vide letter dated 21.06.2024, the Applicant informed 2nd respondent as to its intention to pay the total amount due of Rs.1,1,50,54,281/- through Demand Draft or RTGS on receipt of revised letter accordingly and release Bank Guarantee. Vide letter dated 22.06.2024, the Applicant requested the General Manager, Bellampally Area of SCCL, not to recover the amount from its running bills of Khairagura Project. 3'd respondent has addressed a letter dated 23.06.2024 to the General Manager, Bellampally Area of SCCL requesting to recover an amount ofRs.1,83,64,150/- from the running bills . of the Applicant and the amount of Rs.32,78,3901 which is shown as recovery against costs of explosives supplied by :ri*'ir'.r.'. .::1--'.q.t'*@wxBxtEi:..;{t'*'*''i' 6 5 SCCL dr:rin11 .ire period between 09.06.2019 to 30.rx'.2r119. The Applicant srrlrr Ll.ted a representation dated 03.01 1\(2t to the Chairman ;uu1 i4anaging Director, seeking his intr:rver-rtion by constituting e :r r,-Lrnittee at Directors level for amicable r:sr,lution of the issue, [rrr1 l,,:re was no response. Since there v,as lhreat of encashment cf p:rfonnance security fumished by the Appiicant in the form of Banl: (1 Lurrantee for Rs.79 lakhs, the Applicant hac flled an applicatiorr r,rnC, r Section 9 of the Act vide COP No.34 ot'2024 to restrain respfrl( r,lts from encashing bank guarantee a.nd from l recovering othe bills. Leamed Commercial Court. Fi.a ng a Reddy District at L I-r ".lagar granted interim injunction reit:ai ling the respondenrs li:rt r encashing bank guarantee. As thcre ..r,.ts no order restraining r'( sp , )dents from recovering other bil1s perlitrrning the other contlact:,. ,'re Applicant made payments of entite atnount of Rs. 1,83,64.15t,- ,r the respondent No.1 reserving its rild-r 1o initiate arbitration firr rr:[judication of disputes pertaining ro th e illegal recovery towrurl r:osts and explosives by the respondents. TJ rereafter, the Applicant rvi l'rdraw the said COP No.34 of 2024

7. It ir;.rther contended by the Applicant tha- there are disputes betu'e e L the Applicant and respondents with r.eqar.d to the -..*,].;i€*:,=::;r:;=iia*ti.',1 :, 1 o 6 aforesaid purchase order dated 19.09.2016 and the same are arbitrable in nature. Therefore, invoking the arbitration clause of the said purchase order, the Applicant had issued notice dated 13.08.2024 nominating Sri Y.Govinda Reddy, Retired District Judge to act as sole arbitrator/its nominee Arbitrator to adj udicate the disputes between them in terms of Clause No.1.2l of the order dated 19.06.2016. Despite receiving and acknowledging the said notice, there was no response from the respondents. The Applicant had issued demand notice dated 19.09.2016 to the respondents. Vide letter dated

16.10.2024,3'd respondent rejected to refer the dispute to arbitration for resolution on the ground taht it has lapsed 120 days. Applicant hled the present application to appoint arbitrator to adjudicate the disputes between the Applicant and the respondents.

8. Respondents filed counter contending that the present application is frled by the Applicant is barred by limitation. The Applicant failed to follow the procedure laid down under Clause No.l.21 of the purchase order dated 19.09.2016. As per the said clause, in case any dispute/difference is not settled through negotiations, the respective parties can seek remedy by Arbitration by invoking the same within 120 days of dispute and the Applicant failed 6 1 to follow the sr rrLe. Therefore, the present application i'; t,arred by limitation. 'f r: SCCL initiated contractor's representative through mail in N4ar:r. .1021 to check and sign on the Final Elill dated

03.06.202 I ari ,'d at Rs.1,83,64,150/-, but there was no :esponse The Applicar t b r ving paid disputed amount cannot seek iLpl ointrnent of arbitrator tr : I udicate the disputes.

9. In the I irht of the aforesaid rival submissions, it is rr.:levant to note that tl.rc .,\ -olicant is the successful bidder in the ter rder vide Enquiry detc,l I1 05.2016 issued by l'i respondent dated 13 05.2016. l" respondent l- ril issued purchase order/Firm Order (Selvi,;e) dated

19.09.2015 irr Ii r our of the Applicant for execution of tht: said work. There is a[:io ro rlispute that the Applicant had fumished I'er lormance Bank Guaran:r',: l ol Rs.79 Lakhs. i0. .,\c:.:,r:ing to the Applicant, respondents zre ciue z,.nd liable to pay an rrro rt of Rs.32,78,3901. As discussed supra. there is corespon,lence' l,sflvggn the Applicant and responden'ts right from

11.03.2021 <,i r ards. Respondents demanded an irLount of Rs.1,83,64. I ii(),/ Iowards settlement of Final Bill vide lett,:rs dated

20.04.2024 rr( 25.06.2024. Vide letter dated 06.0ri.2024, 2"d ,..po.rA.nl'!'r,, break up for Rs.1,83,64,150/-. AccorrJirrg to the 7 6 Applicant, the said break up shows that Rs.32,78,3901- recoverable (]1 towards costs of explosiYes. 1 1. Thus, the dispute is with regard to costs of explosives for Rs.32,78,390/-.

12. The Applicant had paid the said amount of Rs.1,83,64,150/- to the respondents reserving its right to initiate arbitration proceedings for adjudication of the disputes perlaining to illegal recovery towards costs of explosives by respondents. The Applicant had filed an application under Section 9 of the Act vide COP No.34 of 2024 and leamed Commercial Court granted interim order. Thereafter, the Applicant withdrew the said application. Thus, according to the Applicant, the respondent recovered an amount of Rs.32,78,390/- towards costs of explosives illegally and according to respondents, the Applicant is due and liable to pay the said amount towards costs of explosives. As discussed supra, respondents are opposing the present application contending that it is baned by limitation.

13. tn the light of the same, it is relevant to note Clause No.1.21 of the said purchase order dated 19.09.2016 deals with the arbitration, the same is extracted :- .. .t o 9

1.21 Azu]l]tl.\.. , (lN: Normally' al l i : putes should be settled by negotiations be .w<:en the Companl ru,1 t.b ' i;oncerned parties. In case anl' --- i respecti*: prirlrr wilhin l2() drLl s ,Lrte/difference is not settled through negotii tions, the . can seek remedy by Arbitration by invokirrg th o same -tlispute. , (a) In casc r 'r of3judicirlo of Arbirratiol The list rl s.u pafty rccllle s s by thc part ,, ir adj udicate .t t: shall condrrr:t. Conciliatior, reasoned l'r,rr equalll, '\'dispute Sole Arbitrator shall be appointed liorn tire list I r:ers rnaintained by SCCL duly following the plov.sions rC Conciliation Act, 1996 as amended from titr.rt to time. r namcs shall be forwarded to the party as an<l .r'hr.:n the rr resolving the dispute Such Judicial Olficer as c rosen i he appointed by the Chairrnan & Managing ) jrector to . isputc as a Sole Arbitrator. The Arbitrator so app, rinted tlrc prooeedings in accordance with the Arbit'ation & , .. I9q6 as amended lrom time to time an. 1,ass I I lloth the parties should bear the cost of the arbit:ation (b) If he S rr Director ,:'tl continuc lL: rr the Chrrrm L: n Limitec th r L:: . \rbitrator appointed by the Chairman & Nlarraging . Sirgareni Collieries Company Limited is unalrle to \.rbitrator for any reasons to be recorded in rir tin g and : N{anaging Director of Singareni Collieries Oornpany 'it tbr appointment of a new Arbitrator in the pl,.ce of existing Ar bit; r-:r, he is having a power to do so. Such nerv l.rbitrator shall br, apt, ri .rl following the same procedure as contemplated in (a) above. (c) As and nh r such new Arbitrator is appointed, he can eith,:r ooLrtinue the arbrtratior ',roceedings from the stage where the earlier lrbitrator discorltrntu d J i ; proceedings or altematively the new Arbilrirtor may start procei'cir :; de novo ifthe circumstances warrant him to lc sc,. I L] - ,::.-*wqs., j 10 a :tl o (d) Failing to invoke Arbitration Clausc within 120 days of disputo, the matter is to be decided by Civil Courts at Khammam District in Telangana alone and not at any other place. (e) Fee and expenses payable to the Sole Arbitrator shall be governed by the Arbitration & Conciliation Act, 1996 as amended from time to time and shall be bome equally by both parties to the dispute. As per the said clause, in case of any dispute/difference is not settled through negotiations, parties can seek remedy by arbitration by invoking the same within I 20 days of dispute

14. As discussed supra, there is exchange of corespondence/letters between the Applicant and respondents in the manner stated supra, ultimately vide letter dated 06.06.2 024, 2nd respondent gave break up for Rs.1,83,64,1501-. As per the said break up, according to the Applicant, respondents recovered an amount of Rs.32,78,390/- towards costs of explosives. The Applicant has filed an application under Section 9 of the Act vide COP No.34 of 2024 Thereafter, the same was withdrawn. The Applicant had paid the said amount of Rs.1,83,64,150/- including an amount of Rs.32,78,390/- towards cost of explosives without prejudice to its right to initiate arbitration proceedings. '(f 11

15. [t ir; a :.c relevant to note that vide letter datecl t)3 07 .2024, the Applir:r:n: r r:uested the Chairman and Managing )i ector of SCCL to intt rr' r re in the matter to resolve the issue br firrming a committee at [)i r',:tor level and also permit the Applicant to refer the issue to thr-' (ior -rniltee in order to resolve the same amicably. The Applicant llsc ' :quested the Chairman and Managin6: Di:ector of respondents tl a ,,e instructions, to the General Manager. JSellampally area not 1.o ,l,l( LLr:t unjustifiable amount from running ril.s of the Applicant ar c r so give instructions to the General N{arrager, of Yellandu alea rt to revoke the Bank Guarantee till the decision comes fronr thr: ( lommittee. Apart from the same, Applicant has also addressed let -t lr .o the General Managers of the both th,i 1r(ras. Thus, the Applicant i r: negotiated with the respondents for rt:sc,lving the issue. Despite t r,: said efforts, there was no resolution of t.he issue. Therefore, ir r rt : rng the arbitration clause, the Applicant hrrd issued notice dated l

08.2024 nominating retired District Jud1r,e, as an arbitrator. 'f1 e s :r :ne was rejected by respondent No.3 vide le'tter dated t6.t0.2024.

16. ln the rght of the aforesaid discussion, it is relevant to note that aftel artr rrrjrlsnl to the Act, vide Act No.lil.2O l6 w.e.f.

4.4 3 s L2

23.10.2015 and in view of the principle laid down by the Apex Court in Vidya Droliav.Durga Trading Corpn.l, this Court being the referral Court under Section 11 of the Act, unless the dispute is manifestly non-arbitrable, this Court must refer the dispute to the arbitration. The limitation issue raised by the respondents requires a deeper factual inquiry, which should be left to the Arbitral Tribunal. This Courl cannot conduct factual enquiry with regard to the limitation issue. In fact, it is for the Arbitrator to consider the said lssue.

17. ln Aslam Ismail Khan Deshmukh vs. ASAP Fluids Pvt.Ltd.2, the Apex Court held that while determining the issue of limitation in the exercise of powers under Section l1(6) of the Act, 1996, the referral court must only conduct a limited enquiry for the purpose of examining whether the Section 1l(6) application has been filed within the limitation period of three years or not. At this stage, it would not be proper for the referral court to indulge in an intricate evidentiary enquiry into the question of whether the claims raised by the petitioner are time barred. Such a determination must be left to the decision of the arbitrator. After all, in a scenario where the referral '(2021)2 SCC I : (2021) I SCC (Civ) s49 ' zozs ltl scc soz c 13 court is able to l:scern the frivolity in the litigation on the basis of bare minimrrrn 1 J ,,radings, it would be incorrect to assu Ir e cr doubt that the ar:bitrrrl :ibunal would not be able to arrive at t he same inf-erence, :srr,:c rlly when they are equipped with tlie l\ower to undefiake au cr :nsive examination of the pleadings and evidence adduced br:fo''e t l(:rlTl. . 18. [n thc I ,ght of the aforesaid principle, coming to th,: facts of the present ca ,', as discussed supra, there was erchange of communicatiott/ :'ltcrs between the Applicant and respc,nCe rts. Vide letter dated () ;06.2024, 2nd respondent gave break up for Rs.1,53,64,1i(',- Thereafter, also there is exchange of le'.ters and there was tl'r t'a ,:f encashment of Bank Guarantee. Jh,:rt'fore, the Applicant har f I ,:d an application under Section 9 o1' the Act vide COP No.l4 ot .1024 wherein learned Commercial ( our granted interim iniunt:t :,r.r. Thereafter, the Applicant withdre,r, the said application. [t r,rs paid the aforesaid amount of Rs 1 8:,64,150/- reserving its r g r,. to refer the matter to the arbitrator. Th:rerafter', the Applicant htrs :.sued notice dated 13.08.2024 nomirrating retired District Judp,e r', arbitrator and vide letter dated l(,. 0.2024 2"d respondent r:-i-r r rd to refer the matter to the Arbitrator. \Vhile so, ."-' 7t t4 respondents cannot contend that the present application is baned by S) limitation. However, it is for the arbitrator to consider the said aspect. This Court, being the referral Court under Section l1 of the limitation Act, has to consider with regard to existence of agreement and arbitration clause in it. This Court cannot conduct an intricate evidentiary enquiry into the question of as to whether the claims raised by the petitioner are time barred as held by the Apex Court in Aslam Ismail Khan Deshmukh (supra). In the light of the same, the contention of the respondents that the present application is barred by limitation, cannot be accepted.

19. With regard to the appointment of sole arbitrator by the Chairman and Managing Director as mentioned in Clause No.1.21 is concemed, it is contrary to the law laid down by the Apex Court in Perkins Eastman Architects DPC vs. HSCC (India) Limited3, wherein the Apex Court held that unilateral appointments were deemed invalid. Therefore, the appointment of an arbitrator in Clause No.1.21 by the Chairman and Managing Director of the respondent is not legally tenable. In the light of the same, the contention of the respondents with regard to Section 28O) of the Indian Contract Act, is 3 (2019) SCC Online SC 1517 o 15 also untena r r: r.s the said Section clearly creates ar :xr;eption to arbitration agr( r'rnents as it since arbitration clauses are corrsidered to be valid ,lherrt trve dispute resolution and do not bar justice. The said exception is er r',Lcted below:- Exception ), - 'iaving of contract to refer questions that have already arisen - No. lr'rll this section render illegal any contract rn writing by which -'rio )r )1ore persons agree to refer to arbitrarion arri, question between th,rr r hich has already arisen, or affect any provisi,r] o1 any law in lbrce lbr tJie trme being as to references to a-rbitration. 20 It is ,lso relevant to note that the Applicant is r ontinuing similar contle c: ' r.vith the respondents. The said fact is not tn dispute. In fact, restr,c rl li'nts tried to recover the aforesaid amount fiorn the bills ofothcr (r( -lracts being executed by the Appticant. 21 . Sr i F 'iri Harsha Reddy, leamed counsel apperrri rg for the respondents pla :,:d reliance on the principle laid down lrr ttrree .ludge Bench of thr: 11 rr:. Court in Oriental Insurance Companr,, Limited Vs. Narhher:,m Power and Steel Private Limiter.la and Centrotradc I,linerals and Metal Inc vs. Hindustan Copper Limiteds u,lu:r n the Apex Court held that an arbitration clause is required to lrt: .r'ictly construed. Any expression in the cltuse must '2018 6 SCC r- .t '20t7 (2) SC(r t8 i i I I 16 unequivocally express the intent of arbitration. It can also lay the postulate in which situations the arbitration clause cannot be given effect to. If a clause stipulates that under certain circumstances there can be no arbitration, and they are demonstrably clear then the controversy perlaining to the appointment of arbitrator has to be put to rest.

22. As discussed supra, in the present case, there are disputes between the Applicant and respondents with regard to excess claim of Rs.32,78,390/- towards costs of explosives. It is an arbitrable dispute to be adjudicated by the Arbitrator

23. In the light of the aforesaid discussion, this Court is of the considered view that there are disputes between the Applicant and Respondents and the same are arbitrable disputes.

24. Accordingly, This Arbitration Application is allowed. Sri Mangari Rajender, Retired District Judge, is appointed as sole Arbitrator to adjudicate the disputes between the parties. The parties are at liberty to take all the defences before the learned sole A-rbitrator As a sequel, miscellaneous applications, if any, pending in the Arbitration Application shall stand closed. /,TRUE COPY" SD' - B. SATYAV ATHI JOINT REGISTRAR SECTION OFFICER N r.."'t"?rr"Fost)

142. Keerthi Richmond- (Along with a CoPY ot To, 1 llt"*lill1Hiiffi[:1ff I I t I i I I i i i I I I

2. One CC to SFI ) NARENDRA REDDY' Advocate IOPUC] I 5. ON" CC tO SRI ' ISRI HARSHA REDDY (SC FOR SINGARE\I ']OLLIERIES I co LID) roPL.' .l

4. Two CD OoPirr:; ADK/ghY( HIGH COURI DATED:02 t05 tZ0Zs \ \ I I ORDER ARBAPPL.ftlr 276 ot 2024 , {}r+r. .4=--r= (6E :'rr re, {k o 12 ; r,l lllllr o ,-. . -r vt. -.t' / ALLOWING I HE ARBAPPL 6coP'(e[ \.*-.- , @"