Anupam Engineers vs Heavy Engineering Corporation

A declaration has been furnished by the proposed Arbitrator, which is at Flag-Y being letter dated July 20, 2018. Learned counsel for the parties

submit that the instant dispute can be referred to the proposed Arbitrator for adjudication.Â

By order dated 06.07.2018, this Court had proposed to appoint Hon’ble Mr. Justice D.G.R. Patnaik (Retd.), former Judge of this Court as

learned Arbitrator to adjudicate the dispute between the parties for the reasons recorded therein. The said order is reproduced here under:-

   “1. Heard learned counsel for the parties.Â

Petitioner has prayed for appointment of an independent Arbitrator in terms of Clause 30 of the General Conditions of Contract i.e., the purchase

order by invoking the jurisdiction of this Court under Section 11(6) Arbitration and Conciliation Act, 1996.Â

 3. Petitioner, a partnership firm engaged in designing and supplying engineering products was placed with purchase order dated 26.07.2014 for

supply of Fabrication Items of EOT Crane by the Respondent Corporation. The work order was to be completed within a period of 60 days from the

receipt of the purchase order. Petitioner started the work in full swing but found several missing drawings and their sub-assembly etc, which was duly

informed through emails dated 01.08.2014, 06.08.2014, 09.08.2014 to the Respondents. Because of delay and negligence to provide the complete

drawings, fabrication work got delayed. Petitioner after receipt of the drawing towards the end of August 2014, expedited and completed the work

and gave inspection call on 17.09.2014 i.e., about a month of receipt of drawings. Inspection was completed on 24.09.2014 and petitioner sought the

clearance for transport from the Corporation. Further the petitioner dispatched majority of goods on 01.10.2014. Petitioner again requested for

inspection of the balance items on 16.102.14 but the Respondents delayed inspection despite communications. Petitioner had to suffer causing overrun

due to idling charges due to delay on the part of the Corporation in deputing Quality Control Representative. Inspection took place on 29.11.2014 and

goods were transported and were received in the H.E.C store on 19.12.2014. The Corporation however avoided payment of 90% to the invoice

amount on 13.10.2014 till 12.06.2017, almost 30 months causing substantial loss to the petitioner. This amounted to serious breach of promise as per

the terms of the purchase order on the part of the Corporation. Payment of 10% of the total amount was due on submission of performance bank

guarantee which have been submitted onÂ

20.12.2014 and payments became due before 20.02.2015. But the H.E.C deliberately avoided to pay till 12.06.2017 i.e., delay of 28 month, which

again caused substantial loss to the petitioner. Serious breach of contract was committed by the Corporation in causing inordinate delay in providing

statutory and mandatory Sales Tax ‘C’ form, which was supplied only in January 2016. Respondents further issued ‘C’ form on

26.08.2016 of Rs.40,26,845/-. Claimant made claim through its letter dated 20.09.2016 with details. Though the performance bank guarantee was

released indicating satisfaction of the goods delivered but payment were deliberately avoided till 12.07.2017. Respondents however by applying duress

took undertaking from the petitioner that all issues relating to outstanding payment has been resolved before the release of payment on 09.06.2017. On

receipt of part payment, petitioner through letter dated 13.06.2017 withdrew the earlier undertakings sent by emails on 9.06.2017 and 12.06.2017 made

under coercion and reiterated its claim through letter dated 13.06.2017. Since no reply was given to the request of the petitioner, he was compelled to

invoke the Arbitration Clause no. 30 of G.C.S purchase order dated 26.07.2014.Â

Respondents in their reply dated 17.08.2017 admitted the delay and explained it on the ground of financial crisis existing at the time of issuance of

purchase order. Inspite of this admitted fact, Respondents have denied all claim of the petitioner resulting in crystallization of the dispute. Respondents

have not acceded to the request for appointment of an Arbitrator in terms of Clause 30 of the CCS of the purchase order, which has compelled the

petitioner to file the present petition.Â

Respondents in their counter affidavit have referred to Clause 30 of the CGS, which is an arbitration clause of the purchase order dated 26.07.2014.

The purchase order, delivery schedule and the receipt of the fabrication items after delay of about 3 months have been accepted by the respondents at

para 4 to 6 of their counter affidavit. As per them the total payable amount of the purchase order came to Rs. 39,06,928/-. Respondents at para 8

have stated that due to paucity of fund, the fund could not get released on time and ultimate payment has been made to the petitioner vide cheaque no.

269179 dated 29.05.2017 amounting to Rs. 4,86,169/-, Cheque No. 269190 dated 30.05.2017 amounting to Rs. 33,51,222 and cheque no. 269225 dated

08.06.2017 amounting to Rs.69,537/- in total Rs.39,06,928/-. Petitioner had also given consent to sign over the letter of undertaking on receipt of full

and final amount. However, after receipt of the full and final payment and after execution of letter of undertaking, petitioner has illegally invoked the

arbitration clause. With regard to the delay in payments, it is stated that it was not intentional rather the company was facing financial cricis at that

time also and was in heavy loss as even the salary of the employees was not regularly paid including the retiral benefits. Other averments have been

made relating to the allocation of short delivery term for supply of the items, the drawings had been sent to the firm in advance for the supply to be

made.

Rejoinder has been filed by the petitioner to the counter affidavit reiterating its position. Learned counsel for the petitioner submits that in terms

of arbitration clause, petitioner is entitled for raising the dispute through arbitration when the Respondents have failed to appoint the arbitrator within

time stipulated despite receipt of the request vide letter dated 18.07.2017. The dispute is live claim.Â

Learned counsel for the Respondent has reiterated the submission made in the counter affidavit to oppose the prayer. He submits that there has

been breach of the terms on the part of the

petitioner as well due to delay in supplies. Respondent Corporation was in financial crisis also which has occasioned the delay. However petitioner

after furnishing an undertaking could not have raised the dispute in relation to the full and final settlement of the payments made for such supplies.Â

I have considered the submission of the learned counsel for the parties and taken into account the relevant facts and circumstances. The arbitration

clause under the purchase order dated 26.07.2014 deals as under:-

 “ In the event of any dispute or difference of opinion between the Heavy Engineering Corporation or any of its units / division and the

contractors as to the respective rights and obligation of the parties hereafter or to the true intent and meaning of these presents and the many articles

of conditions thereto, such dispute of difference of opinion shall be referred to the many articles of conditions thereto, such dispute of difference of

opinion shall be referred to the sole arbitration of the Chairman, Heavy Engineering Corporation and his decision shall be final, conclusive and binding

on the parties.â€​

Petitioner has raised the claim for release of outstanding dues against the supplies made under the purchase order dated 26.07.2014. As per the

case of the Respondents, payments were made between the period May to June, 2017 for a sum of Rs.39,06,928/- as full and final payment. Purchase

order stipulated the time period of 60 days for the supplies to be made. Both parties alleged breach of reciprocal promises for the delay in supplies.

Petitioner alleges duress under which he had to furnish undertaking from which he resiled. Petitioner, thereafter served notice dated 18.07.2017 upon

the respondents invoking the arbitration clause for appointment of an independent arbitrator. Respondents though replied to the notice vide Annexure-

P/5 but did not accede to the appointment of an arbitrator.Â

From the conspectus of the aforesaid material facts, it therefore appears that there are existing dispute between the parties in relation to the

agreement being purchase order dated 26.07.2014. Clause 30 of the GCS of the contract framing part of the purchase order provides for an arbitration

clause quoted above. Respondents despite service of notice on 18.07.2017 failed to appoint an arbitrator in terms thereof. The ingredient for invoking

the jurisdiction of this Court for appointment of an arbitrator under Section 11(6) of the Act of 1996 as amended therefore stands fulfilled. I am

therefore satisfied that the petitioner has made out a case for appointment of an independent arbitrator to adjudicate the dispute between the

parties.Â

Accordingly, I propose to appoint Hon’ble Mr. Justice D.G.R. Patnaik (Retd.), former Judge of this Court, at present residing at Flat No. A-4,

Sahni Apartment, Pee Pee Compound, Main Road, Ranchi834001 having mobile number no. 9431348007 as an independent arbitrator to adjudicate the

dispute between the parties. The proposed arbitrator is required to furnish a declaration in terms of Section 12 of the Act of 1996 as amended.Â

Let a copy of the instant order be communicated to the proposed arbitrator by learned Registrar General for the said purpose. Let the case appear

on 03.08.2018. Declaration furnished by the proposed arbitrator, if any, be placed on record by the next dateâ€​.Â

Since the proposed Arbitrator has furnished declaration in terms of Section 12 of the Arbitration and Conciliation Act, 1996, I hereby appoint

Hon’ble Mr. Justice D.G.R. Patnaik(Retd.), former Judge of this Court as Independent Arbitrator to adjudicate the dispute between the parties.

Learned Arbitrator would be free to lay down his fees and other expenses towards conduct of the arbitration proceedings, however keeping into

account the ceiling prescribed under Schedule IV of the Act of 1996 as amended. Learned Arbitrator would endeavour to conclude the proceedings

expeditiously, also taking into regard the mandate of the Legislature under Section 29-A of the Act of 1996.Â

Let photocopy of the entire pleadings along with copy of the instant order be sent to the learned Arbitrator by the Registry.Â

Arbitration Application is disposed of accordingly.Â