EMM ENN Associates vs Commander Works Engineer Etc.

Vijender Jain, C.J.—This petition has been filed by the petitioner u/s 11 of the Arbitration and Conciliation Act, 1996 (for short ''the Act''), for appointment of sole arbitrator.

Clause 70 of the agreement contains the arbitration clause which reads as under:

All disputes, between the parties to the contract (other than those for which the decision of the C.W.E. or any other person is by the contract expressed to be final and binding) shall, after written notice by either party to the contract to the other of them, be referred to the sole arbitration of an serving officer having degree in Engineering or equivalent or having passed final/direct final examination of Sub-Division II of Institution of Surveyor (India) recognised by the Government of India to be appointed by the authority mentioned in the tender documents.

Unless both parries agree in writing such reference shall not take place until after the completion or alleged completion of the works or termination or determination of the contract under Condition Nos. 55, 56 and 57 hereof.

Provided that in the event of abandonment of the works or cancellation of the contract under Condition Nos. 52,53 or 54 hereof, such reference shall not take place until alternative arrangements have been finalised by the government to get the works completed by or through any other contractor or contractors or agency or agencies.

Provided always that commencement or continuance of any arbitration proceeding hereunder or otherwise shall not in any manner militate against the government''s right of recovery from the contractor as provided in Condition No. 67 hereof.

If the arbitrator so appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new arbitrator to act in his place.

The arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties, asking them to submit to him their statement of the case and pleadings in defence.

The arbitrator may proceed with the arbitration, ex parte, if either party, in spite of a notice from the arbitrator fails to take part in the proceedings.

The arbitrator may, from time to time with the consent of the parties, enlarge the time for making and publishing the award.

The arbitrator shall give his award within a period of six months from the date of his entering on the reference or within the extended time as the case may be on all matters, referred to him and shall indicate his findings, along with sums awarded, separately on each individual item of dispute.

If the value of the claims or counter-claims in an arbitration reference exceeds Rs. One lakh, the arbitrator shall give reasons for the award.

The arbitrator shall give reasons for the award in each and every case irrespective of the value of claims or counter-claims.

The venue of arbitration shall be such place or places as may be fixed by the arbitrator in his sole discretion.

The award of the arbitrator shall be final and binding on both parties to the contract.

The petition was filed by the petitioner in April 2005. The case of the petitioner is that petitioner served a notice along with the list of claims due to the petitioner, through speed post on 23.02.2005. However, when no arbitrator was appointed, the petitioner preferred the present petition.

A few important facts may be noticed. It is an admitted case of the parties that work was completed on 23.09.2000 and the final bill was paid by the respondent to the petitioner on 10.04.2001. However, the petitioner has contended that final bill did not include the payment against several items which were still pending. Confronted with the arguments raised by counsel for the respondent that no claims were raised, by the petitioner, within the period of three years, either from the date of completion of work or from the date of payment of the final bill, which was 10.04.2001, the partner of the firm, who has argued the matter in person, relied upon Clause 67(f) and (g) of the agreement to contend that the currency of the contract stood extended beyond the period of two years from the date of payment of undisputed portion of the final bill.

Another interesting argument raised by the petitioner is that as per Clause 49 of the contract, as no certificate was granted by the G.E. for the group of items of the works at the end of the defects liability period, therefore, contract has not come to an end and the limitation has not yet started. In support of his contention, the petitioner has relied upon a judgment of S.B.P. & Co. v. Patel Engineering Ltd. and Anr. 2005(4) RCR SC 747 : 2005(3) A LR 285 (SC) and specifically relied upon para no. 38 of the said judgment in support of his contention that the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction or by receiving the final payment has to be left to the arbitrator and the Chief Justice while exercising jurisdiction in terms of Section 11 of the Act cannot decide the question of limitation.

Reliance was also placed on judgments as Prasar Bharati v. Stracon (India) Limited 2004(3) A LR 297 (Del.) and Madhava Hytech Engineers Pvt. Limited, Secunderabad v. Union of India, South Central Railway, Secunderabad and Anr. 2003(1) A LR 611 (AP).

It is no more res integra that while exercising jurisdiction u/s 11 of the Act, the court has to only decide the question whether there is an arbitration agreement as defined in the Act and whether the person who has made request before him is a party to such an agreement. However, in Patel Engineering Ltd. the directions have been summed up as conclusions in paragraph No. 46 of the said case. Sub-para (iv) of para No. 46 of the said judgment reads thus:

(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate.

Considering in totality, the case-law cited by the petitioner, this court while exercising jurisdiction u/s 11 of the Act would normally leave the question of limitation, open for adjudication by the arbitrator. However, where, it is manifestly clear that no live claim exists, the directions of the Supreme Court in Patel Engineering Ltd. case would require adjudication of this question. So far as the benefit of Clause 67 of the agreement is concerned, the same deals with recovery from the contractor. Embargo of two years as per Clauses (f) and (g) is with regard to the right of the respondent to effect recovery from the contractor, beyond which, the respondent cannot make recovery. This clause does not extend the period of limitation, in favour of the petitioner, if he has not taken steps to agitate his allegedly unsatisfied claims. During the course of hearing, I repeatedly questioned the petitioner as to whether he can show the foundation of the claim at Annexure A which he raised on 23.02.2005, prior to 23.09.2001 or 23.09.2002. The petitioner was unable to produce any such document. The case of the petitioner was that he had sent this claim as part of final bill prior to completion of work, on 23.09.2000. When the petitioner himself failed to agitate the matter, even after receiving the final bill on 10.04.2001, it can by no stretch of imagination, be said that petitioner was interested in putting forth any claim or that his claim was still alive.

As the petitioner has failed to prima facie show this court that there was alive claim of the petitioner, I find no merit in this petition and the same is dismissed.