M/s Kranti Builders vs M/s Right Time Builders Pvt. Ltd.

H.R. Malhotra, J.—By making this petition under the provision of Section 11(2) and (6) of the Arbitration and Conciliation Act, 1996, the petitioner seeks appointment of an Arbitrator to adjudicate upon the disputes arising between the parties. The facts leading to the filing of the instant petition are as under:--

The respondent invited tender for the purpose of construction of 120 residential apartment, known as Vijay Lakshmi Apartment. The petitioner submitted its tender and the same was accepted. Pursuant thereto, the petitioner and the respondent entered into an agreement on 30th March, 1996 for construction of multi-storied apartment at Hardwar, U.P. As per the agreement the respondent agreed to pay a sum of Rs. 1,02,22,921/- and the work was required to be completed within 22 months from the date of the agreement. According to the petitioner, work commenced at the site with full swing and the petitioner had submitted its running bill on 30th September, 1997 for civil and electrical works to the respondent, which bill was withheld by the respondent despite the petitioner having completed the work to the extent of 60%. The petitioner requested the respondent to clear the arrears of the amount so that further work did not suffer but the respondent instead of making the payment sent a letter to the petitioner on 10th November, 1997 asking the petitioner to stop the work at the site which letter was replied by the petitioner on 22nd November, 1997 expressing its willingness to continue the work. The dispute could not be resolved between the two thus necessitating the petitioner to issue legal notice to the respondent dated 13th August, 1998 which notice was replied by the respondent. The petitioner again sent reply to the letter of the respondent now requesting the respondent to appoint Arbitrator to resolve the disputes in terms of clause 10.2 of the agreement entered into between the parties.

Thereafter, numerous letters were exchanged between the parties with a view to resolve their disputes amicably. Specifically both the parties agreed to appoint conciliators. The respondent appointed Sh. Hari Singh Kanwar as its conciliator vide letter dated 24th July, 1998 whereas petitioner appointed Sh. M.L. Sareen as its conciliator vide letter dated 12th August, 1998.

Although, the conciliation proceedings were initiated by the conciliators but matter could not be resolved because of alleged non-cooperative attitude of the respondent and its conciliator and finally the conciliator of the petitioner was constrained to stop the conciliation proceedings and intimated the respondent about the same on 27th September, 1999 indicating about the closing of the conciliation proceedings and advising the parties to approach the Court for appointment of an Arbitrator. This is how the present petition has been filed seeking appointment of the Arbitrator for resolving the disputes as detailed in Annexure P-8 attached with the petition.

This petition has been contested by the respondent. The detailed reply to the petition has since been filed by the respondent taking numerous preliminary objections amongst others about the maintainability of the petition seeking its rejection under Order 7 Rule 11 CPC on the ground that the petitioner failed to follow the agreed mode of invoking the jurisdiction of this Court. It is further stated by the respondent that the petitioner failed to abide by the procedure as prescribed in clause 10.1, 10.1.1, 10.2, 10.2.1 as he did not send any protest or grievance to the engineer within 15 days from the date of the decision to him therefore, petitioner is deemed to have waived his right to raise the objections.

Dismissal of the petition is also sought on the ground that the petitioner failed to disclose the specific cause of action warranting appointment of arbitrator. It is further replied by the respondent that the petitioner had made a request for arbitration in their letter dated 25th June, 1998 which request was taken note and the respondent acted upon the request of the petitioner by offering the conciliation of the proceedings an also gave the name of the conciliator which was accepted by the petitioner and in turn the petitioner also appointed their own conciliator. But conciliation proceedings could not attain finality because of hostile attitude of the petitioner and their conciliator. The filing of this petition as termed as motivated with a view to extract whatever is possible without having worked on the project.

I have heard learned Counsel for both the parties and have also gone through various documents accompanying the petition including the agreement containing arbitration clauses 10.1, 10.1.1, 10.2, and 10.2.1. It is true that in the matters regarding materials, workmanship or interpretation of contract the decision of the company was to be final and binding on the contractor and similarly on the aspect of technical question which might have arisen touching the contract the engineer''s decision was final and conclusive and that the petitioner contractor could redress their grievances before the engineer within 15 days from the date of such decision. It appears that this exercise was not undertaken as nothing is available on record indicating if the engineer was ever moved in terms of clause 10.1 and 10.1.1. There is however, no doubt that the parties to the petition themselves agreed to refer their disputes to a sole Arbitrator to be selected by the petitioner/contractor from among the panel of three nominators to be indicated by the respondent at the time of reference of the dispute to the Arbitrator. Despite there being such clause of Arbitration it appears that none of the parties resorted to this procedure. Instead while exchanging various letters on the claims and counter claims, both the parties agreed to go for conciliation proceedings as provided u/s 61 of the Arbitration and Conciliation Act, 1996 and for that, as is evident from various letters, both the parties specified the names of each of the conciliators. It is thus manifest that both the parties had clear intention in their mind to get their dispute resolved not through Court but by the Arbitrators or conciliators. It is different thing that either of the party did not take steps for appointment of Arbitrator strictly in terms of clause 10.1 and 10.2.1. Merely because the petitioner did not opt for independent Arbitrator in consonance with clause 10.1.2, it cannot be said the petitioner lost their right to get their dispute resolved through Arbitrator. As is seen from the letter dated 24th July, 1998, of the respondent the petitioner had requested the respondent for referring the dispute to the Arbitration. The respondent instead of going for Arbitration opted for conciliation and nominated Sh. Hari Singh Kanwar as their conciliator. The petitioner in turn appointed Sh. M.L. Sareen as their conciliator. However, these two conciliators could not conclude conciliation proceedings because of certain differences not only between the parties but even between the conciliators. Otherwise it can clearly be gathered that both the parties intended to get their dispute resolved through an Arbitrator.

Although, this petition has been filed under the provision of Section 11(2) and (6) of the Arbitration and Conciliation Act, 1996, but looking to the pith and substance of the petition as also the correspondence exchanged between the parties it is abundant clear that parties wanted to get their dispute resolved through conciliation as provided u/s 61 and for that parties had taken effective steps and even the names of the conciliators were indicated by the parties. It is different matter that two conciliators appointed by the parties were had confrontation than having coordination with each other and even the parties to the petition did not cooperate with the conciliators in good faith nor did they make endeavour to submit written materials before the conciliators and perhaps for that reason, conciliators were not made fully aware of the dispute between the parties. But that does not mean that it precludes either of the parties to move the Court for having recourse to judicial proceedings. Section 77 of Arbitration and Conciliation Act, 1996 is answer to such situation. It reads as under:-- Resort to arbitral or judicial proceedings - The parties shall not initiate, during the conciliation proceedings, any arbitral or judicial proceedings in respect of a dispute that is the subject-matter of the conciliation proceedings except that a party may initiate arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for preserving his rights.

On reading the aforesaid provisions I am of the opinion that the petitioner rightly moved for preserving their rights as it was the only remedy open to the petitioner to move the Court for appointment of an Arbitrator as two conciliators appointed by each of the parties failed to act in accordance with Section 61 and other connected provisions of law. True, necessary steps were not taken by the petitioner as provided u/s 11 of the Act but looking to the peculiar circumstances as prevailed in this case because of appointment of two conciliators and their failure to reach the conclusion, it shall be unjust to throw the petition merely because certain legal obligations is provided u/s 11 (4) of the Act were not carried out. Consequently, the petition deserves to be allowed. While allowing the petition Mr. Justice P.K. Jain, former judge of this Court is hereby appointed as an Arbitrator. His fee is fixed at Rs. 50,000/- to be jointly paid by the parties.