The High Court · 2025

...APPELLANT/PETITIONER/DEFENDANT

1. Union of lndia. rep. by General Manager, South Central Railway, Rail Nilayam Secunderabad-50007 i

2. Dy. Chief Engineer/TP, South Central Railway, Rail Nilayam, Secunderabad- 500071 lA NO: 1 OF 2024 ...RESPONDENTS/RESPONDENTS/PLAINTIFFS Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all the further proceedings in O.S. No. 78 ol 2O21 before the Honble Xll Additional Chief Judge, City Civil Court, Secunderabad during the pendgncy of the above referred Civil Miscellaneous Appeal. Counsel for the Appellant: M/s. VINITA R CHAUHAN Counsel for the Respondents: SRI M. RAMA KRISHNA REP. FOR SRI GADI PRAVEEN KUMAR, DEPUTY SOLICITOR GENERAL OF INDIA The Court delivered the following: JUDGMENT THE HON'BLE SRI JUSTICE T. VINOD KUMAR AND THE HON'BTE SRI JUSTICE PUTLA KARTHIK Civ 2 202 !N JUDGMENT:(per Honble Sri Juslle f.Vind Kumar) A n This Civil Miscellaneous Appeal is directed against the order -dt.29.10.2024 in I.A.No.B27 of 2022 in O.S.No.7B of 202ton the file of the XII Additionar chief Judge, city civir court, secunderabad, whereby the underrying interlocutory apprication fired by the apperant herein as the defendant in the suit filed by the respondents herein under Section B of the Arbitration and Conciliation Act, 1996 (for short, .the Act) has been dismissed.

2. Heard learned counser for the appeilant and sri M.Rama Krishna, learned counsel representing Sri Gadi praveen Kumar, learned Deputy Solicitor General of India appearing for the respondents, and perused the record.

3. The appellant herein is the petitioner in the underlying interlocutory application anc, defendant in the suit filed by the respondents herein as plaintiffs for recovery of a sum of Rs.Bg,55,71l/_ being the increase in cost and the consequential loss on eccount oF the failure of the appellant herein in making supplies, pursuant to e-tender issued by the respondents herein. 2 a-

4. Appellant further contends that as the respondents have failed to place purchase order within 120 days from the date of validiry of the offer made by it, the offer made by the appellant pursuant to the e-tender issued by the respondents stood cancelled and as such' the respondents cannot seek to enforce the covenants of contract or standard terms of contract forming part of e-tender' It is the further case of the appellant that notwithstanding the 5. termlnation/cancellation of the purchase order issued by the respondents' the respondents have now sought to recover the suit amount from the appellant herein on the ground that the appellant failed to make iupplies in pursuance of the purchase order placed on it' It is also the contention of the appellant that since the relationship 6. between the parties is governed by the Indian Railway Standard Conditions of Contract, forming part of the e-tender issued by the respondents, the respondents cannot maintain the suit before the Civil Court for recovery of the aforesaid sum and ought to have referred the dispute for its resolution by arbitration as provided in Clause 2900 of the Indian Railway Standard Conditions of contract, providing for resolution of disputes bY arbitration' 7. Appellant further contends that on the respondents filing the aforesaid suit, it had filed the underlying interlocutory application before the Coiftlbelow praying for dismissal of the suit and to refer the parties I to arbitration in the right of the arbitration agreement contained in crause 2900 of the Indian Railway Standard Conditions of Contract; and that the Court below had erroneously dismissed the same, by observing that already the matter was referred to Arbitrator and the rearned Arbitrator had passed award on 02.12.2019 and thus, the appellant herein availed the remedy under Section g of the Act. B. It is the contention of the appellant that the suit filed by the respondents herein is in relation to recovery oF increased cost and consequential loss suffered by it, on account of the purchases made by it, by invoking risk purchase clause of agreement and reference to arbitration at an earlier point of time was in relation to the penalty imposed and thus, both disputes are independent of one another and the Court below had erred in dismissing the underlying interlocutory application filed under Section g of the Act.

9. In support of his contentions, appellant p.laced reliance on various decisions of the. Hon,ble Supreme Court in Hindustan petroleum Corporatrbn Limited v/s. pinkcity Midway petroleuml; Branch Manager, Magma Leasing and Finance Limited v/s. poiluri Madhavilatl; Ameet Lalchand Shah u/s. Rr.shabh Enterprisef; ' lzoo:; o sciTo: ' 1zoos1 ro scc to: '(2018) 15 scc 678 4 ..- - ",,' Vidya Drolia v/s. Durga Trading Corporationa; McDermott \-' fnbrnational fnc. v,/s, Burn Standard Corporation Limitef; S.N.Prasad Hitek fndustries (Bihar) Limited u/s. Monnet Finance Limitef; Gammon India Limifud v/s. National Highways Authority of Indil and Dolphin Dritting Limited v/s, Oil and Natural Gas Corporation Limited

10. Per contra,learned counsel appearing on behalf of the respondents would submit that it had filed the suit for recovery of the amount due to the failure of the appellant herein to make supplies under the purchase order placed on it, by invoking risk purchase clause forming part of the tender conditions.

11. It is also contended on behalf of the respondents that since the appellant had already invoked the remedy of arbitration against the termination of contract, and imposition of penalty of Rs.50,00,000/-, it cannot seek for referring the dispute once again for arbitration. L2. We have taken note of the respective contentions urged.

13. A perusal of the counter-affidavit filed by the respondents in the underlying interlocutory application would clearly show that the " lzozrl z scc t t (zooo) tr scc rar ' (zon) r scc azo 1 2o2o scc onlpl1et 6ss " (zoro) : scc zoz - -. .1., . 5 respondents herein are seeking to recover the suit amount by placing reliance on the contract terms, which provides for recovery of loss/damage under risk purchase. Thus, the suit fired by the respondents herein is only by exercise of powers conferred under the contract/standa rd conditions of the contract and not outside the contract. Once, the respondents are seeking to recover the loss or damage caused to it, in terms of the contract, it is not open for the respondents to plead that the subject suit would fall outside the scope of the contract and thus, the arbitration clause contained in the agreement would not be applicable.

14. Further, it is also to be noted that even in respect of the terminated contract arso, arbitration wourd be avairabre to the affected pafi to claim remedies thereunder.

15. Further, it is also to be noted that in a recent decision, the Apex court had held that even if a contract is terminated, the arbitration crause would survive. (see SAf General fnsurance Company Limited v/s. Krish Spinningfi. \

16. Applying the aforesaid decision of the Apex court to the facts of the case, since the respondents are seeking recovery of suit amount as I '2024 sCC OnLine 5C 1754 6 P-a\ loss/damage caused to them, which had arisen only on account of the purchase order placed by it, this Couft is of the view that the said dispute would also be arbitral dispute to be resolved only by reference to arbitration and the respondents cannot proceed by filing a civil suit'

77. Thus, this Court is of the opinion that the Court below erred in dismissing the underlying interlocutory application filed by the appellant under Section B of the Act in refusing to refer the dispute to arbitration and proceeding with the suit filed by the respondents'

18. Accordingly, the impugned order dt'29'10'2024 in I'A'No'827 of 2022inO.S.No.78 of 202L onthefileof theXllAdditional Chief ludge' City Civil Court, Secunderabad, is set aside and the appeal is allowed and the matter is remitted back to the Court below to refer the parties to resolve the dispute through arbitration in terms of Clause 2900 of the Indian Railway Standard Conditions of Contract'

19. Miscellaneous petitions, if any, pending shall stand closed' No orde r as to costs. //TRUE COPY// SD/.K.SRINIVASA RAO JOINT REGISTRAR SECTION OFFICER To, 1 The Xll Additional Chief Judge, City Civil Court, Secunderabad (with records if any) Z. One'CC to M/s. Vinita R Chauhan, Advocate [OPUC] 5. O;; CC to Sri Gadi praveen Kumar, Dy. Soliiitor General of lndia [OPUC] 4. Two CD CoPies Plp/PSL w - --_<:j__,:_*--' HIGH COURT DATED:1 9102t2025 JUDGMENT CMA.No.632 of 2024 t1 14 I e t 0 2 trriy mm t EOHCrApsDe t ALLOWING THE C.M.A. WITHOUT COSTS AND REMITTED BACK. .,{^