Mysore Construction Company vs Brindavan Hydro-Power Private Limited

Aravind Kumar, J.—Heard Sri. K. Arun Kumar, learned counsel appearing for petitioner and Sri. Sriranga, learned counsel appearing for respondent.

Petitioner is seeking for appointment of an Arbitrator contending inter alia that as per the agreement entered into between parties dated 29.12.2008 it provides for resolution of disputes through arbitration and he would rely upon the Arbitration clause found in the said agreement which is at clause 65 which is said to be part and parcel of the General Conditions of Contract/GCC clause 25.3. It is the contention of Sri. Arun Kumar, learned counsel appearing for petitioner that there was no contract data entered into between the parties and in view of the same clause 24 or 25 would not be applicable which is said to be pressed into service by respondent to reject the claim for appointment of Arbitrator. Hence, it is contended by him that only clause which is available to the parties to resolve the disputes would be clause 65 and hence he prays for appointment of a sole Arbitrator. He would also elaborate his submission by contending that respondent in reply to the demand made by the petitioner for payment of billed amounts has by its reply dated 21.04.2014 Annexure-G admitted the amount payable to petitioner would be at Rs. 3,10,84,455/- and as such it cannot now contend contrary to the same and in view of respondent denying the claim of petitioner it has given cause of action for petitioner to invoke arbitration clause and accordingly notice came to be issued by the petitioner on 10.09.2014 as per Annexure-K making claim for payment of amounts indicated therein and also indicating that in the event of claims of petitioner not being settled, dispute may be referred to arbitration by nominating its arbitrator and seeking for concurrence of the respondent.

Respondent having filed its detailed statement of objections by denying the claim of petitioner contends that agreement between the parties provides for resolution of dispute between the parties at the first instance by a named person as provided under the contract namely the Engineer of the employer and after his decision is rendered, if either of the parties were to be aggrieved by the same they can seek for same being adjudicated by the named adjudicator as provided under clause 24.1 of the agreement and in the event of adjudicator''s decision not being to the satisfaction of either of parties or in the event of decision of adjudicator not being acceptable to either employer or contractor, they would be at liberty to seek for resolution of such disputes only to be settled by arbitration and as such present petition is premature. It is also contended that respondent by virtue of Clause 24.1 of the agreement had raised its claim before the Engineer who has now rendered a decision by way of an award on 23.01.2015 Annexure-R-2 and as such if the petitioner is aggrieved by said decision or award it can approach the adjudicator for rendering his decision on those issues or points which petitioner may not agree and seek for appropriate relief as provided under clause 24.1 and without resorting to said course of action petitioner cannot seek for appointment of arbitrator under section 11 of the Act. Hence, learned counsel Sri. Sriranga appearing for respondent by reiterating contentions and grounds urged in the statement of objections prays for dismissal of the petition.

Having heard the learned advocates appearing for the parties and on perusal of the records and also after bestowing my careful and anxious considerations to the rival contentions raised, this court is of the considered view that following points would arise for consideration:

"1. Whether petitioner and respondent have agreed for resolution of dispute by referring the said dispute to an arbitrator or have they agreed to any other mode or method for resolving the disputes so as to disentitle the petitioner to the prayer sought for in this petition?

What order?"

RE: POINT No. 1:

In order to adjudicate the point formulated herein above it would be necessary to extract the relevant clauses of agreement which has been pressed into service by both the parties and they read as under:

"1. DEFINITIONS:

The Adjudicator is the person appointed jointly by the Employer and the Contractor to resolve disputes in the first instance, as provided for in Clauses 23 and 24. The name of the Adjudicator is defined in the Contract Data.

The Contract Data defines the documents and other information which comprise the Contract.

"The Engineer is the person named in the Contract Data (or any other competent person appointed and notified to the Contractor to act in replacement of the Engineer) who is responsible for supervising the execution of the works, administering the Contract, certifying payments due to the Contractor, issuing and valuing Variations to the Contract, awarding extensions of time, and valuing the Compensation Events.

Engineer''s Decisions

4.1 Except where otherwise specifically stated, the Engineer will decide contractual matters between the Employer and the Contractor in the role representing the Employer.

Disputes

24.1 - If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer''s decision.

Procedure for Disputes

25.1 The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute.

25.2 The Adjudicator shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the contract data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator''s written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator''s decision will be final and binding.

25.3 The arbitration shall be conducted in accordance with the Arbitration and Conciliation Act, 1996.

Arbitration (GCC Clause 25.3)

25.3 (a) In case of Dispute or difference arising between the employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The arbitral tribunal shall consist of 3 arbitrators one each to be appointed by the employer and the contractor. The third arbitrator shall be chosen by the two arbitrators so appointed by parties and shall act as presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Indian Council of Arbitration/President of the Institution of Engineers (India)/The International Centre for Alternative Dispute Resolution (India).

(b) xx

(c) If one of the parties fails to appoint its arbitrator in pursuance of sub-clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the Indian Council of Arbitration/President of the Institution of Engineers (India)/The International Centre for Alternative Dispute Resolution (India), both in cases of the Foreign contractor as well as Indian Contractor, shall appoint the arbitrator. A certified copy of the order of the Indian Council of Arbitration/President of the Institution of Engineers (India)/The International Centre for Alternative Disputes Resolution (India), making such an appointment shall be furnished to each of the parties.

(d) Arbitration proceedings shall be held at Bangalore, India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.

(e) xx

(f) xx

(g) xx"

There is no dispute to the fact that respondent invited tenders for execution of civil works relating to Tunga Mini Hydel Scheme (MHS) (2 x 10 MW and 1 x 4 MW) pursuant to which petitioners submitted its bid and work order came to be issued in favour of petitioner after accepting the bid submitted by it. Pursuant to the same parties have entered into an agreement dated 29.12.2008 as per Annexure-A. Petitioner has commenced the work and said to have completed the contract after intermittent stoppages due to various reasons as set out in the petition. On conclusion of contract petitioner has raised its claim by submitting Final Bill on 06.09.2013 which was followed by an issuance of completion certificate by respondent on 22.02.2014 Annexure-F. On its claim being pursued by petitioner respondent by its reply dated 21.04.2014 Annexure-G has intimated that amounts indicated therein are pending for payment which is subject to reconciliation. Perusal of the said communication would clearly indicate that the respondent has admitted that a sum of Rs. 3,10,84,455/- is the total amount payable by it to the petitioner subject to conditions stipulated therein. It is contended by petitioner that respondent had assured and promised payments due to petitioner stating that on account of financial difficulties it could not make payments and was informed that it was in the process of selling Power House and as soon as it is sold money due to petitioner would be paid. It is stated by petitioner that it was waiting in the fond hope of receiving its money from respondent but to its utter surprise and shock it received a communication dated 04.09.2014 Annexure-J from respondent demanding money from petitioner on the ground that petitioner is liable to pay a sum of Rs. 2,20,30,446/-. Petitioner claims that on account of non payment of amounts due to petitioner from respondent it issued notice calling upon the respondent to pay total amounts as specified therein and in the event of respondent not agreeing to pay the said amounts petitioner sought for referring the dispute to Arbitrator and invoked the arbitration clause and appointed its arbitrator and requested the respondent to concur with the said appointment of arbitrator. Respondent herein on receipt of notice dated 10.09.2014 Annexure-K has duly replied by reply dated 08.10.2014 Annexure-C-10 (filed along with Annexure R-1) denying the claim of the petitioner and raised a counter claim. Respondent after receiving notice dated 10.09.2014 Annexure-K issued by petitioner is said to have raised its claim before the designated Engineer as per clause 4.1 of the agreement contending inter alia that it is the petitioner who is liable to pay the amounts to respondent and said authority (designated Engineer) is said to have adjudicated the claim of respondent and that too without issuing notice to petitioner and passing an award as per Annexure-R-2. Though respondent has contended that notice came to be issued by designated Engineer to the petitioner which is seriously disputed by petitioner same is not an issue which requires to be gone into by this court for adjudicating the point formulated herein above and said exercise is not undertaken and it is left at it.

The only ground on which respondent intends to stave off the arbitration clause which has been pressed into service by the petitioner is on the ground that parties have agreed upon to resolve their disputes as per clause 24 and only when the designated Engineer renders a decision on parties claim either of the parties if not being satisfied with the said decision would be entitled to approach the adjudicator who is named under the contract and only such disputes are required to be adjudicated by the named adjudicator and in the event of decision rendered by the adjudicator not being to the satisfaction of either party they would be entitled to seek for reference to Arbitrator within 28 days of adjudicator''s written decision and as such present claim is premature.

As to whether said contention is susceptible to acceptance or not will have to be examined in the background of clauses referred to in the agreement which are extracted hereinabove. At the outset it is noticed that Sri. Sriranga, learned counsel appearing for respondent has very fairly submitted that there is no "contract data" entered into between the parties. His submission is placed on record.

Keeping this in mind when I turn my attention back to the clauses referred to in the agreement/GCC it would clearly indicate that under clause 24 if the contractor believes that a decision taken by Engineer was either outside the authority given to the Engineer under the contract or that a decision was wrongly taken then only those decisions taken by Engineer can be referred to the adjudicator within 14 days of the notification of Engineer''s decision vide clause 24.1. A perusal of said clause would also clearly indicate the option is given to the contractor alone and employer has no role in the decision of Engineer. It is only on such decision being taken by the Engineer which relates to the authority given to him/parties under the contract by which the Engineer can take and only after he takes such decision the contractor can seek for such decision being adjudicated by an Adjudicator. Clause 1.1 of the agreement would clearly indicate that Engineer means the person who is named in the "contract data" (or any other competent person appointed and notified to the contractor to act in replacement of Engineer). There is no material placed in this regard by respondent to establish that parties had agreed for a named Engineer to enable him to take a decision. Undisputedly there is no "Contract data" entered into or agreed upon by parties. On the other hand as per clause 1.1 of the agreement it is agreed between parties that Engineer is the person named in the "contract data". When there is no "contract data" entered into between parties, which is also fairly admitted by Sri. Sriranga, learned counsel for respondent, question of disputes between the parties being adjudicated by an Engineer does not arise. In other words parties had not agreed for any Engineer to adjudicate the disputes or have given up this clause by implicitly ignoring it. On this short ground itself contention raised by learned counsel appearing for respondent requires to be rejected.

Even otherwise when the clauses referred to herein are scanned in detail the irresistible conclusion which requires to be arrived at is that parties have agreed under the contract in question that even after a decision being rendered by the Engineer, if the employer is not satisfied with the decision so rendered by the Engineer, it would be open to the contractor to seek for such decisions being referred to adjudicator within 14 days of the notification of Engineer''s decision. In the instant case neither Engineer has rendered any decision nor the contract which provides for the Engineer to be a person named under "contract data" had been appointed by agreement between parties and in the absence of such a contract contention of respondent about employer having acted pursuant to clause 24.1 and thereby Engineer having rendered his decision on 23.01.2015 as per Annexure-R-2 and consequently petitioner has to seek for adjudication if petitioner is not satisfied with said decision cannot be accepted.

Be that as it may. Agreement in question would clearly indicate that even after said decision being rendered by the Engineer and same being pursued by the contractor before the adjudicator who may render his decision as per clause 25.2 also enables either party to seek for reference to an arbitrator within 28 days of the decision rendered by adjudicator. Thus, clause 24.1 and 25.2 when read conjointly would indicate that accepting that there was a "contract data" (which was not there) between the parties, they had agreed for resolution of dispute in 3 tier system i.e., Engineer''s decision, Adjudicator''s decision and then Arbitrator''s decision. However, in the instant case "contract data" having not been entered into between parties, both the parties will have to necessarily fall back upon clause 65 of the agreement namely arbitration clause. Said clause undisputedly formed part of General Conditions of Contract 25.3 which is already extracted herein above and same would clearly indicate that both parties had agreed for resolution of their disputes or differences connected with the agreement being resolved under Arbitration and Conciliation Act, 1996 and by virtue of said clause petitioner has rightly invoked Arbitration clause and has sought for appointment of an Arbitrator and as such issued notice dated 10.09.2014, Annexure-K calling upon the respondent to comply with the demand made therein namely to pay amount demanded thereunder and on its failure to pay the same to concur with the appointment of Arbitrator indicated therein and on account of respondent having not concurred with the said appointment, petitioner has approached this court.

In view of clause 65 found in the subject agreement this court is of the considered view that parties had agreed for resolution of disputes arising out of the subject contract being resolved through arbitration and as such prayer sought for by petitioner deserves to be granted. Accordingly Point No. 1 formulated hereinabove is answered in favour of petitioner.

RE: POINT No. 2:

For reasons aforestated, I proceed to pass the following:

ORDER

(i) Civil Miscellaneous petition is hereby allowed.

(ii) Hon''ble Justice Sri. K.N. Keshavanarayana, Former Judge of this court is hereby appointed as Arbitrator and he is requested to enter upon reference and arbitrate the dispute and conduct arbitration proceedings at Arbitration Centre, Bengaluru in terms of the Arbitration Centre, Karnataka (Domestic and International) Rules, 2012.

(iii) Costs made easy.