National Building Construction Corporation Ltd. vs S. Gopalarathinam

Raju, J.—Having regard to the nature of the issue involved in the stay petition and also in the main appeal, the main appeal itself has been

taken up for hearing and the learned counsel appearing on either side submitted their arguments in this regard.

Respondent herein undertakes engineering contract works and has entered into an agreement with the appellant for construction of buildings for

Navodhaya Vidyalaya First Phase at Karaikal. Pursuant to the invitation to tender, the respondent submitted his offer on 2.12.1989 for doing

work and the same was accepted by the appellantion 3.5.1990. The work is in progress. As per the terms and clause contained in the tender

conditions, for any work done for more than Rs. 5,000/- the contractor would be entitled to receive a monthly payment for the work done on the

certificate issued by the Engineer-in-charge regarding satisfactory completion of work. Clause (7) would also stipulate that the certificate of the

Engineer-in-charge of the sum of payable shall be final and conclusive. According to the respondent, as per the certificate issued by the Engineer-

in-charge, work to the tune of Rs. 68,67,799.08 has been completed and the appellant has been paying Rs. 62,40,413.60 leaving a balance of Rs.

6,27,358.48. It is for recovery of the balance amount due, as noticed above, even as per the certificate issued by the Engineer-in-charge

respondent has laid O.S. No. 19 of 1993 on the file of the Additional District Judge, Pondicherry at Karaikal.

On receipt of the summons, appellant herein has filed an application u/s 34 of the Arbitration Act, seeking to stay further proceedings in the suit

till adjudication between the parties by the Arbitrator, as provided in the contract.

The court below, after hearing both the parties, by its order 9.2.1994, which is under challenge in this appeal, held that on a harmonious reading

of Clause 7 of the contract and Clause 18 of the tender conditions, there is no dispute within the meaning of clause 18 to be referred to arbitration

and, therefore, the suit cannot be stayed u/s 34 of the Arbitration Act.

Learned counsel appearing for the appellant contended that the court below committed an error in holding that there are no dispute between the

parties within the meaning of clause 18 and that the reliance placed on the decision of the Supreme Court in Union of India (UOI) Vs. Birla Cotton

Spinning and Weaving Mills Ltd., , was not correct and that even on a perusal of the plaint, it could be seen that there are disputes between the

parties regarding the execution of the work within the stipulated time or its failure and the right of the appellant to withhold or deduct amounts and

that, therefore, the court below committed an error in rejecting the application. It is also stated by the learned counsel for the appellant that the

appellant is entitled to withhold payment as against the amounts recoverable from the respondent under the terms of the contract for non-

performance of the defective and delayed performance of the work and that, therefore, there is absolutely no justification to reject the application

u/s 34 of the Act. It was also contended that the court below was not right in holding that the respondent has not specified as to what are the

disputes to be referred to for adjudication by the Arbitrator, in the teeth of the very averments contained in the plaint and the subsisting difference

between the parties.

Learned counsel for the respondent adopted the reasonings given by the court below and contended that the amount sought to be recovered is

not the subject matter of any dispute and that the very amount having been determined and certified by Engineer-in-charge of the appellant and has

also been rendered final on such determination by the Engineer, recovery of such amount cannot be stated to be a claim a disputed one attracting

the arbitration clause between the parties and consequently there is absolutely no merit, in the contention raised on behalf of the appellant, by way

of challenge to the order of the court below rejecting the application u/s 34 of the Act.

Learned counsel for the appellant relied on certain decisions. The decision reported in Union of India v. B.C.S. & W. Mills Limited. (supra), was

relied on by the court below to reject the claim of the appellant. Learned counsel for the appellant submits that the said decision has no application

to the case on hand, since in the case before the Supreme Court, the Union of India, which entrusted the contract to the contractor, though liable to

pay the amount under the terms of the contract, was not prepared to pay the same because it desired to appropriate it towards another claim

under another independent contract and such a course cannot be considered to be regarded as a dispute ""under or in connection"" with that

contract under which the liability sought to be enforced has arisen and so far as the case on hand is concerned the amount has been withheld in

respect of the liability arising under the very contract. Though on, the facts and circumstances of the case therein, such a view has been expressed

on the merits of the claim therein, learned Judges of the Supreme Court have held that for enforcement of the arbitration clause there must exist

dispute and in the absence of dispute between the parties to the arbitration agreement, there can be no reference.

Learned counsel for the appellant has also placed reliance on a decision of the Andhra Pradesh High Court in Gousia Javed and another Vs.

Jagdish Pershad Associates, . That decision was that of a Division Bench wherein the learned Judges of the Division Bench specifically recorded a

finding that even though there was an amicable settlement of the amounts due under the agreement concerned therein and subsequent failure to

abide by the same on account of the cheque issued for settlement of the account being dishonoured, the suit filed subsequently for recovery of the

amount covered by the said settlement could also be stayed, based on the original agreement, which provided arbitration clause and therefore, was

liable to be stayed u/s 34 of the Act. Such is not the position in the case on hand. The respondent has not claimed in the plaint for settlement of his

accounts under the contract and recovery of the amounts as a whole but is only seeking to recover the unpaid portion of the amount certified even

by the Engineer-in-charge of the appellant, as due for the work done by the respondent.

The next decision cited by the learned counsel for the appellant is reported in Great Success Martime and Trading Co. Pvt. Ltd., by their Power of

Attorney Agent N. Murughasan Vs. Raj Maritimes and Another, , rendered A. R. Lakshmanan, J., wherein the learned Judge, while dealing with

an application u/s 34 of the Arbitration Act, held that Section 34 of the Act requires that the applicant must satisfy the court that he was at the time

when the proceedings were commenced and still, remains ready and willing for the proper conduct of arbitration and that the said section does not

prescribe the making of any formal averment to that effect. The said decisions has no relevance to the case on hand or that issue to be considered

in this appeal.

On a careful consideration of the submission of the learned counsel appearing on either side and also the decisions referred to supra, I am of the

view that the existence of a dispute by and between the parties is a sine quo non and secondly the claim made in the suit by-passing the arbitration

clause must be such as otherwise arbitrable under the agreement and either of the parties have by passed the binding arbitration clause by having

recourse to the ordinary Civil Court. So, for as the claim in the suit, O.S. No. 19 of 1993 on the file of the Additional District Judge, Pondicherry,

is concerned, the plaint makes it clear that the recovery sought for is only the amount certified by the Engineer-in-charge of the work of the

appellant. The clause so referred to by the court below would go to show that assessment of the value of the work executed by the contractor by

the Engineer-in-charge is final and that being the position there is hardly any scope for contending that such amount certified by the Engineer-in-

charge of the appellant is a disputable claim under clause 18 of the tender conditions which contained an arbitration clause in respect of the

contractor in question. The fact that there are other disputes is no justification to hold that arbitration clause is attracted even in respect of an item

of claim which is rendered beyond dispute and outside the purciew of the arbitration clause. The court below was of the view, and rightly in my

opinion, that no specific dispute was shown to have arisen before the institution of the suit and it is only in that context observed that the appellant

has not chosen to disclose even in the application for stay the so-called dispute. The order of the court below in this regard cannot be said to

constitute any serious error of law. In view of the conclusion of mine that the amount sought to be recovered in the suit filed by the respondent is

only the balance of the certified amount, over which there can be no controversy or dispute and the claim is only confined to the recovery of the

said certified amount, the conclusion of the court below that the arbitration dispute is not attracted to the case on hand and that there was no

justification to stay the trial of the suit does not appear to be erroneous. The contentions of the appellant to the contrary and the settlement said to

be required in respect of other disputes are wholly outside the purview of the suit claim and also the consideration to be kept in view in the matter

of dealing with an application u/s 34 of the Act with particular reference to the nature of the claim in this case. Hence, they are not dealt with at

length and in detail. The appeal therefore, fails and shall stand dismissed. The appellant, if it is so desires is directed to file its written statement

within eight weeks from this date in the court below.

Appeal dismissed.