PUNJAB AND HARYANA HIGH COURT, CHANDIGARH v. The Chief Engineer (The Employer) Haryana PWD B & R, Sector 19-B & Anr.

CORAM: Hon'ble Mr. Justice Mukul Mudgal, Chief Justice. *** Present: Shri Akshay Bhan, Advocate, for the petitioner. Shri Anil Rathee, Addl: A.G.Haryana, for the respondents. ***

1. Whether Reporters of local papers may be allowed to see the judgment? 2. Whether to be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Mukul Mudgal, CJ By filing this petition under Section 11(1) of the Arbitration and Conciliation Act, 1996, the petitioner seeks the appointment of an Arbitrator to settle the dispute between the parties. Upon notice of motion, the respondents puts in appearance and filed a reply asserting that as per provisions of the contract agreement, the petitioner did not mobilize his resources resulting into delay in the completion of the project which was to be completed by 9.1.2008 and the delay was on the part of the petitioner. Because of this fact, the contract was terminated on 5.5.2008 under clause 59.4 of the contract agreement. I have heard learned counsel for the parties and gone through the record with their assistance. In the agreement, there is an arbitration clause, which reads as 2 under:- Arbitration Case No. 24 of 2009. Clause 67 Arbitration (GCC Clause 25.3) The procedure for arbitration will be as follows:- '' (a) In case of dispute or difference arising between the Employer and a domestic Contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The Arbitral Tribunal shall consist of three arbitrators one each to be appointed by the Employer and the Contractor. The third arbitrator shall be chosen by the two Arbitrators so appointed by the Parties and shall act as presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Government of Haryana. The arbitrators including the Presiding Arbitrator so appointed must possess minimum educational qualification of degree in Civil Engineering. If one of the parties fails to appoint its arbitrator within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then Government of Haryana shall appoint the arbitrator. A certified copy of the order of the Government of Haryana, making such an appointment shall be furnished to each of the parties. (b) Arbitration proceedings shall beheld at Chandigarh or at any place within the State of Haryana to be decided by the arbitrators in consultation with both the parties. The language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (c) The decision of the majority of arbitrators shall be final and binding upon both the parties. The cost and expenses of arbitration proceedings will be paid as determined by the Arbitral Tribunal. (d) Where the value of the Contract is Rs. 50 millions and below, the disputes of differences arising shall be referred to the sole arbitrator. The Sole Arbitrator should be appointed by agreements between the parties, failing such agreement, by the appointing authority, namely by the Government of Haryana. Performance under the contract shall continue during (e) the arbitration proceedings and payments due to the Contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings. (f) It is also a term of this arbitration agreement that 3 Arbitration Case No. 24 of 2009. where the party invoking arbitration is the contractor, no reference for arbitration shall be maintainable unless the contractor furnishes to the satisfaction of the Resident Engineer-in -charge of the work a security deposit of a sum determined according to details given below and the sum so deposited shall on the termination of the arbitration proceedings as adjusted against the cost if any, awarded by the arbitrator against the claimant party and the balance remaining after such adjustment in the absence of any such cost being awarded the whole of the sum will be refunded to him within one month from the date of the award:- Amounts of Claims (i) For claims below Rs.10,000/- (ii)For claims of Rs.10,000 and below Rs.1,00,000/-. Rate of security deposit. 2%of amount claimed. 5% of amount claimed. (iii)For claims of Rs.1,00,000/- and 10% of amount above. claimed. The stamp fee due on the award shall be payable by the party as desired by the arbitrator and in the event of such party's default stamp fee shall be recoverable from any other sum due to such party under this or any other contract”. The learned counsel for the respondents very fairly conceded that he has no objection to the appointment of an Presiding Arbitrator as per the terms of the contract agreement. In so far as sub clause (f) of clause 67 of the Arbitration agreement is concerned if the arbitration clause is involved by the contractor, the reference shall not be maintainable unless he furnishes security deposit as contemplated in the agreement executed between the parties. The learned counsel for the petitioner Mr. Bhan submitted that the security deposit is not payable for claims above Rs. Five Crores. Since, the amount of claim involved in this petition was more than Rs.5 Crores, it was covered by sub-clause (c)of clause 67 of the agreement wherein it is provided that the expenses incurred by each party in connection with the preparation, presentation, etc. of the proceedings as 4 Arbitration Case No. 24 of 2009. also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself and the fee and expenses paid to the presiding arbitrator shall be borne equally by both the parties themselves. The learned counsel for the petitioner has relied upon sub clause (f) where the phrase arbitrator is used and not the Arbitral Tribunal. It has been contended that since sub clause (f) refers to an arbitrator and only relates to claim below Rs. Five Crores (50 Milion). It has been contended that wherever the claim is below Rs. 5 crores, deposit as per sub clause (f) is required to be made since sub clause (f) uses the word arbitrator and not the Arbitral Tribunal (three members), which was required as per the aforesaid agreement. In my view, the plea of learned counsel for the petitioner cannot be accepted because in that situation it would create an analomous situation in favour of a claim higher than Rs. Five Crores.. In so far as the claims between Rs.1,00,000 to Rs. Five Crores is concerned 10% of the amount claimed is required to be deposited as security and for claim above Rs. Five Crores, as per the petitioner's plea no amount is required to be deposited as security. This would led to an unfair situation and all that the claimant needs to do for avoiding the rigors of the aforesaid requirement of security deposit is to inflate the claim above Rs. Five Crores, because no security deposit is payable on such claims. Such an interpretation would lead to an absurd result and cannot be countenanced by this Court. I am satisfied that the word “Arbitrator'' used in sub clause (f) would also include ''Arbitral Tribunal'' particularly taking into account sub clause 67(d) of the Arbitration agreement, for ready reference which is extracted below:- ''(d) Where the value of the Contract is Rs. 50 millions and below, the disputes of differences arising shall be referred to the sole arbitrator. The 5 Arbitration Case No. 24 of 2009. Sole Arbitrator should be appointed by agreements between the parties, failing such agreement, by the appointing authority, namely by the Government of Haryana''. The intent of the above sub clause is only to avoid three arbitrators fees in claims below Rs. Five Crores. However, the mention of phrase arbitrator in sub clause (f) cannot exclude reference to an arbitral tribunal. Learned counsel for the petitioner placed reliance on Municipal Corporation Jabalpur and others Versus M/S Rajesh Construction Company- AIR 2007 Supreme Court 2069 to supplement his contention that if the amount of claim is more than Rs. Five Crores, no security amount is required to be deposited. In my view the ratio of the decision cited by learned counsel for the petitioner is not applicable to the facts of the case in hand as in fact that judgment holds in para 16 that no arbitration is permissible in the absence of a security deposit. As a sequel of the above discussion, the petition is partly allowed directing the respondent to appoint the arbitrator within a period of two months of the receipt of copy of this order, provided the petitioners deposit the security amount within a period of one month from today. With the above observations, the petition is disposed of, with no order as to costs. February ..........., 2010 Malik (Mukul Mudgal) Chief Justice