Central Warehousing Corporation and Another vs Gowthami Engineering Corporation

N.Y. Hanumanthappa, J.—This appeal is filed against the judgment and decree dated 31-7-1993 passed in O.S. No. 652 of 1988 on the file of the learned I Additional Subordinate Judge, Vishakapatnam. The suit is filed u/s 20 of the Indian Arbitration Act for appointment of an arbitrator for adjudication of the disputed claims and for costs. The plaintiff is carrying business in civil contracts. The plaintiff was entrusted with the work of construction of 5000 MT capacity godowns along with ancillaries at Vishaka patnam by giving work order on 28-2-1981. The defendants delivered the work site to the plaintiff on 30-3-1981 and the construction of the godown was started on 8-4-1981. It is stated that an agreement was entered into between the parties on 10-7-1981. Ultimately the work was completed on 21-12-1981 excepting the electrification, flooring of verandahs etc. The said work has been completed by 16-4-1982. It is stated that the plaintiff supplied 1000 wood crates on 30-4-1983. As the payment has not been made, the plaintiff got issued legal notices to the defendants, but there was no response. Clause 25 of the agreement clearly stipulates that settlements of all the disputes shall be by appointment of an arbitrator. Moreover, the defendants adjusted a sum of Rs. 80,000 by invoking the bank guarantee furnished by the plaintiff. A final bill was passed for a meagre sum of Rs. 302-93 ps. Hence the suit.

The second defendant filed a written statement, which was adopted by the first defendant, contending that the period of completion of work, under contract, was five years, that at the request of the plaintiff, the time was being extended from time to time, that in all the plaintiff received a sum of Rs. 9,00,798-15 ps. for the contract work by 3-3-1983, except a small amount of Rs. 302-93 ps. payable under the final bill. The said fact has been intimated to the plaintiff. The plaintiff, by letter dated 15-4-1986 submitted a list of demands to refer the same to an arbitrator. It is stated that the said matters did not attract the arbitration Clause 25 of the agreement and hence the list of demands were rejected as not maintainable. However, the plaintiff by letter dated 5-9-1988 included two additional claims, but the plaintiff was informed that arbitrator could not be appointed as the final bill is ready, as per the agreement and that the request is barred by limitation. It is stated that the plaintiff did not complete the work and thereby the defendants got the remaining work executed through other agency at the risk and cost of plaintiff. The defendants levied a sum of Rs. 4,76,733-00 towards compensation, which is liable to be paid by the plaintiff. Since the plaintiff failed to pay the amount levied as compensation, the amount of Rs. 80,000-00, under the bank guarantee, was adjusted towards part satisfaction of the compensation. Hence the suit may be dismissed with costs.

The Court below, after going through the documentary evidence available on record decreed the suit. Aggrieved by the same, this appeal is by the defendants.

Heard. The main contentions of the appellants are that there is no arbitration clause in the agreement-Ex.A-2 in respect of the works left over; and that the claims made by the plaintiff are time barred. These two contentions were well considered by the Court below upon appreciation of the evidence available on record. It is proper to extract Clause 25 of the agreement- Ex.A-2, which reads as follows:

"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship of materials used on the work or as to any other question, claim, right matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instruction orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Managing Director, Central Warehousing Corporation at the time of dispute or if there be no Managing Director, Central Warehousing Corporation the administrative head of the said Central Warehousing Corporation at the time of such appointment. There will be no objection to any such appointment that the arbitrator so appointed is a Corporation employee, that he had to deal with the matters to which the contract relates and that in the course of his duties as Corporation employee he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Managing Director or administrative head as aforesaid at the time of such transfer, vacating office or being unable to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Managing Director or Administrative head of the Central Warehousing Corporation, as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases, where the amount of the claim in dispute is Rs. 50,000/- (Rupees fifty thousand) and above, the arbitrator shall give reasons for the award.

Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is also a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute.

It is also a term of the contract that if the contractor (s) does/do not make any demand for arbitration in respect of any claim (s) in writing within 90 days of receiving the intimation from the Corporation that the bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Corporation shall be discharged and released of all liabilities under the contract in respect of these claims.

The arbitrator(s) may from time to time with consent of the parties enlarge the time for making and publishing the award."

The Court below, after taking into consideration the agreement- Ex.A-2 entered into; and the claims made, including the dispute as to the execution of work, held that since the dispute exists, the Managing Director of the Central Warehousing Corporation is bound to refer the matter to the arbitrator. The Court below has rightly rejected the contentions of the appellants in regard to the limitation point. In our view the reasoning adopted by the trial Court to reach the conclusions negativing the contentions raised by the appellants is just and proper. Hence there is no merit in the appeal. Accordingly the appeal is dismissed. No costs. However, it is directed that the Central Warehousing Corporation shall appoint the arbitrator in the matter to refer various claims preferred by the plaintiff-respondent for adjudication and then pass award as expeditiously as possible. The appointment of arbitrator shall be made within a period of thirty days from the date of receipt of a copy of this order.