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Judgment
Heard Mr. Abhishek Vinod Deshmukh, learned counsel for the applicant as well as Mr. Ramakant Mishra, learned Deputy Solicitor General for the respondents.
The present application has been filed by the applicant for appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short,the Act of 1996) as the respondent has failed to agree for appointment of an independent Arbitrator, preferably a retired Judge, for adjudication of disputes between the parties.
The facts, as projected by the applicant are that the applicant is a company incorporated under the Indian Companies Act and is registered with the Registrar of Companies vide Certificate of Incorporation dated 23.01.2019. The applicant is inter-alia, engaged in the activity of construction and undertaking infrastructure projects.
The the Respondent No. 2 invited a bid for the work of "Execution of work for design of bridges and buildings, earthwork in formation, construction of major and minor bridges, service buildings, (S&T Building, gate goomty, end goomty, OHE Depot, PSI depot, etc), Supply of machine crushed stone ballast, transportation of railway materials, P. Way works general electrical works for buildings & stations and other allied works between Tirora station (Excluding yard) to Gondia station (Including yard) in connection with 3rd BG Railway line between Kalumna - Rajnandgaon stations of Nagpur Division of SEC Railway".
M/s. P. Venkata Ramanaiah & Co. had also participated in the tender and upon becoming the successful bidder, the Letter of Acceptance was issued by the Respondent No. 4 on 23.04.2018 for the Contract Value of Rs. 77,51,39,111/- (Rupees Seventy Seven Crores Fifty One Lakhs Thirty Nine Thousand One Hundred and Eleven Only). The work was to be completed within the period of 18 months. Subsequently, the Contract Agreement was signed between the Applicant and the Respondent No. 4. Due to variation in quantities, the contract value was increased to Rs. 84,60,06,819/- vide letter dated 26.11.2020. M/s. P. Venkata Ramanaiah & Co., in accordance with the terms of Letter of Acceptance, had submitted the Bank Guarantee bearing No. 12/2018 dated 20.06.2018 issued by the Syndicate Bank (Now Canara Bank i.e. the Respondent No. 5) for an amount of Rs. 3,87,56,956/-with validity upto 31.12.2019. The Bank Guarantee was extended from time to time, last extended by the Respondent No. 5 Bank till 31.12.2023 vide extension dated 27.12.2022.
In the meantime on 23.01.2019, the said M/s. P. Venkata Ramanaiah & Co. was reconstituted/restructured and registered as a Private Limited Company i.e. the Applicant. On 10.04.2019, the Applicant informed the Respondent authorities about the conversion of the said M/s. P. Venkata Ramanaiah & Co. to the name of the present Applicant. Thereafter, the Bank Guarantees were also renewed in name of the present applicant and the bills were raised and payments were made in the name of Applicant by the Railways. While submitting the bid, Security Deposit of Rs. 41,59,540/- was deposited with the Respondent and further amount of Rs. 3,81,40,801/- was recovered through on account bills. Thus, the total Security Deposit was Rs. 4,23,00,341/- available with Railways. Accordingly, on the request made by the Applicant, the Railway directed the Applicant to submit the Bank Guarantee of said amount so that the deposited amount could be released to the Applicant. The Applicant, thereafter on 09.06.2022 submitted the Bank Guarantee being BG No. 08/2022 issued by the Respondent No. 5 for an amount of Rs. 4,23,00,341/- towards release of Security Deposit Amount. The said Bank Guarantee was extended vide Bank Guarantee dated 09.06.2023 uptil 08.06.2024.
Since the inception of the Contract, the work was being delayed due to the reasons not attributable to the Applicant, namely, delay due to absence of Royalty Clearance on account of Order passed by Hon'ble National Green Tribunal, delay due to variation in quantities, delay due to COVID-19 Pandemic, delay due to mining permission, delay due to alignment issues, delay due to S&T clearances, delay due to clearance required from electricity board, delay due to delay in approval of structural drawings etc. As a result of which, the original Contract Period has been extended by the Respondent from time to time till 31.12.2023 and last extension was granted vide letter dated 30.06.2023.
The Respondent No. 4 issued the purported 7 days' notice dated 20/21.06.2023. The said notice was also not in accordance with the proforma provided under the General Conditions of Contract. This notice was replied by the Applicant vide its letter dated 27.06.2023, requesting the Respondent to withdraw the notice and to allow the Applicant to execute the work.
Immediately on the very next date, vide its letter dated 22.06.2023, the Respondent while acknowledging the fact that the Applicant has executed about 74.75% of financial progress, requested the Applicant to apply for extension of time immediately which would be considered on its merit of the case. Accordingly, the Applicant had on 27.06.2023 applied for the extension of time, which was granted vide the letter dated 30.06.2023 upto 31.12.2023 with token penalty of Rs. 50,000/-.
After receipt of the extension of time till 31.12.2023, the Applicant was executing the work, the Respondent shocked the Applicant by issuing a 48 hours' notice dated 03.07.2023 without issuing the 7 days' notice in accordance with the provisions of GCC. The Applicant vide its letter dated 04.07.2023 requested to withdraw the 48 hours' notice so that the work can be executed. The Respondent No.4 issued the final termination notice dated 07.07.2023 to the Applicant, which was received on 08.07.2023. It is stated that this letter was replied by the Applicant vide its letter dated 10.07.2023 stating that termination of contract within 8 days of sanctioning of extension of time is not at all prudent and requested to give an opportunity to complete the work.
Time and again, the Applicant requested the Respondent to resolve the claims, however, the Respondent failed to pay heed to same. Accordingly, the Applicant vide its notice of settlement of dispute dated 20.07.2023 submitted various claims for settlement in accordance with clause 63 of GCC- (i) Declaration that the termination of the Contract by the Railways is illegal; (ii) Claim for refund of Bank Guarantee towards Security Deposit; (iii) Claim for refund of Performance Guarantee; (iv) Claim for amount payable towards Final Bill; (v) Claim for amount payable towards PVC Bills; (vi) Claim for Loss of profit for balance unexecuted work due to wrongful termination of contract; (vii) Claim for idling of men and machinery; (viii) claim for amount towards overhead and for prolongation of contract. In the said letter, the Respondent was requested to appoint conciliator for settlement of dispute between the parties.
The Deputy Chief Engineer vide its letter dated 05/07.10.2023 replied to the Applicant that the dispute raised cannot be settled in house. It is pertinent to note here that the letter for settlement of dispute was sent to Respondent No. 1 in accordance with contract conditions whereas it was replied by the Deputy Chief Engineer. The Applicant, then vide its letter dated 16.10.2023, invoked the Arbitration clause and referring the disputes to arbitration inter-alia stating that "Accordingly, you are requested to constitute an arbitral tribunal of independent person, preferably of a retired judge for adjudication of the claims." The Respondent vide its letter dated 19.10.2023 while acknowledging the receipt of the demand of arbitration from the Applicant, informed the Applicant that the request of Applicant for constitution of arbitral tribunal consisting of retired judge, which is beyond the purview of the Railways.
Learned counsel for the applicants submits that in view of the forgoing compelling circumstances there is no effective remedy to the Applicant except approaching this Hon'ble Court for appointment of an independent Arbitrator under Section 11 (6) of the Arbitration and Conciliation Act, 1996 as the condition precedent for the application has been satisfied as the respondent has failed to appoint the arbitrator at the request by the Applicant to do so. It is pertinent to point out here that the Applicant has filed an application under Section 9 of the Arbitration & Conciliation Act, 1996 before the Ld. Commercial Court, wherein the Respondent in their reply in para 31 have stated that "as per clause 64 of General Conditions of Contract and as per Condition No. 1.38 of Agreement page no. 38, this is the jurisdiction of Arbitrator to solve the dispute between the parties". Accordingly, the Applicant is approaching this Hon'ble Court, for appointment of a sole Arbitrator.
On the other Mr. Ramakant Mishra, learned Deputy Solicitor General appearing for the respondents submits that the applicant has filed an application before the respondent No.1 for appointment Arbitrator vide letter dated 16.10.2023 and as per General Condition of Contract, minimum 120 days time is required for appointment of Arbitrator. When the respondent failed to appoint Arbitrator within stipulated time which is mentioned in General Condition of Contract, then Hon’ble Court have jurisdiction to appoint Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, but applicant has filed petition for appointment of Arbitrator within 20 days from the date of submission of application for appointment of Arbitrator to the respondent. The application filed by the applicant is not proper as they have not maintained the agreed provision of General Condition of Contract.
Mr. Mishra submits that though a detailed para-wise return has been filed denying the contentions of the applicant and praying for dismissal of this arbitration request, however, he submits that the respondents will have no objection if this Court appoints a Sole Arbitrator to resolve the dispute.
Mr. Deshmukh as well as Mr. Mishra, learned counsel for the parties jointly submit that the dispute between the parties may be referred to the sole arbitration of Hon’ble Justice Mr. R.C.S. Samant, a retired Judge of this High Court, residing at Bilaspur.
In view of above, Hon’ble Justice Mr. R.C.S.Samant, a retired Judge of this High Court is appointed to act as the Sole Arbitrator to resolve the dispute between the parties. The Registry is directed to communicate this order to Hon’ble Justice Samant in the proper address.
The remuneration of the Arbitrator shall be settled with the mutual consent of the parties.
The arbitration application, accordingly, stands allowed.