T.S.SANIL v. M/S.LULU INTERNATIONAL CONVENTION CENTER

K.T.SANKARAN, J.------------------------------------------------------ A.R. NO. 14 OF 2010------------------------------------------------------ Dated this the 29th day of July, 2010 O R D E RThe petitioner, the proprietor of M/s.Silpa Constructions, entered into a contract with the respondent for construction of aconvention center and allied buildings at Thrissur for the respondent. There is no dispute that the work was completed as on 28.7.2006. Itis stated that 7% of the amount covered by the running bills wasretained by the respondent as retention money. It was agreed by theparties that the retention money would be returned to the petitionerafter the defect liability period of twelve months was over. It is statedthat the total retention amount, including the earnest money deposit, was Rs.49,42,488/-. The petitioner stated that the respondent paidan amount of Rs.42 lakhs on various dates. According to thepetitioner, the balance due to him from the respondent isRs.7,42,488/-. 2. Two agreements were executed by the parties in respect ofthe construction of the buildings. They are, Annexure-A agreementdated 29.10.2004 and Annexure-B agreement dated 4.2.2005. ARB. REQUEST NO.14 OF 2010 :: 2 ::Clause V (10) of Annexure-A agreement and Clause V(9) ofAnnexure-B agreement contain the arbitration clause. Thearbitration clause reads as follows:“10. With regard to settlement of disputes thearchitect will give final decision and if not satisfied withthe above decision the particular issues are to bereferred to the Arbitrator mutually agreeable by bothparties in accordance with the provisions of Arbitrationand Conciliation Act, 1996 or any statutory modificationsin force. If parties are not satisfied with the decision ofarbitrator the issues are to be referred to court atThrissur.”3. It is stated in the Arbitration Request that though thepetitioner approached Sri.N.M.Salim, the Architect, no settlementwas arrived at. This is not disputed by the respondent. Annexure-Cnotice was issued by the petitioner to the respondent demanding theamount. The respondent replied as per Annexure-D reply dated18.12.2009, in which, the liability was disputed. It was contendedthat the respondent would be entitled to get a sum of Rs.46,50,000/-from the petitioner on account of the delay occasioned in thecompletion of the work. Another sum of Rs.25 lakhs is claimed on ARB. REQUEST NO.14 OF 2010 :: 3 ::account of the Value Added Tax. The petitioner issued Annexure-Enotice dated 17.12.2009 requesting the respondent to communicateits consent to appoint Sri.N.Sukumaran as the arbitrator. InAnnexure-F reply dated 27.1.2010, the respondent made it clear thatthe arbitrator suggested in Annexure-E is not acceptable to therespondent.4. A counter affidavit is filed by the respondent reiterating thecontentions put forward in the reply notice. In the counter affidavitfiled by the respondent, it is stated as follows:“3. Section 10 of the Kerala Value Added TaxAct, 2003 imposes responsibility on the awarder of thework to deduct the tax payable by the contractor inrelation to the goods transferred in the execution of theworks contract from the payments made to thecontractor, including advance payment, and to remit it toGovernment. But the respondent herein had notdeducted any amount from the applicant since theapplicant had made the respondent to believe that hewas paying tax under the said Act to the assessingauthority. But the Assistant Commissioner (AuditAssessment), Commercial Taxes, Thrissur issued noticedated 15.10.2007 to the respondent proposing to ARB. REQUEST NO.14 OF 2010 :: 4 ::assess the petitioner for the years 2005-2006 and 2006-2007 taking into account the contract amount ofRs.1,61,99,208/- in respect of which the applicant hadnot paid tax. A copy each of the said notices dated15.10.2007 is produced herewith and is marked asExhibit R1 and Exhibit R2 respectively.4. The respondent has filed reply to Ext.R1 andExt.R2 notices. A copy of the reply dated 30.11.2007 isproduced herewith and is marked as Exhibit R3respectively. But orders on Ext.P3 are yet to be passedby the Commercial Taxes Department.5. If the proposals in Ext.R1 and Ext.R2 areimplemented, an amount of Rs.15,18,676/-(approximately) will be payable in relation to the contractamount already received by the applicant, which is theactual liability of the applicant under the Kerala ValueAdded Tax Act. The amount of Rs.6,73,395/- retainedby the respondent will be too insufficient to meet the taxliability of the applicant.”5. It is admitted that the dispute between the parties isarbitrable. The arbitrator, as suggested by the applicant, is notacceptable to the respondent. In the facts and circumstances of thecase, all the disputes which arose between the parties in relation to ARB. REQUEST NO.14 OF 2010 :: 5 ::the contracts are required to be settled by the arbitrator. Accordingto the petitioner, the dispute relates to repayment of the retentionamount. The respondent contended that since the liability under theValue Added Tax is not finalized, the amount is liable to be retained. This also amounts to a dispute. In the facts and circumstances ofthe case, I am of the view that the matter requires to be referred toarbitration under Section 11(6) of the Arbitration and Conciliation Act.As regards the appointment of arbitrator, various names came up forconsideration. It is agreed by the petitioner as well as the respondentthat Sri.O.Ramachandran Nambiar (Retired District Judge),Advocate, Ernakulam can be appointed as the arbitrator. Accordingly, the Arbitration Request is allowed. Sri.O.Ramachandran Nambiar, Advocate is appointed as thearbitrator to resolve the disputes between the petitioner and therespondent in respect of the matters mentioned in the ArbitrationRequest as well as in the counter affidavit.(K.T.SANKARAN)Judgeahz/