Nav Bharat Nirman Co. vs Project Director, "RUIDP" and Others

Bela M. Trivedi, J.—The present application has been filed by the applicant seeking appointment of arbitrator under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ''the said Act'').

It appears that an agreement was executed between the applicant and the respondents on 18.8.2005 for "Restoration and conversation of Jag Mandir and C.B. Tank including addition of viewer''s gallery in Brij Vilas Palace Museum, Kota". Clause 21.6 of Section X of General Conditions of contract was made part of the agreement executed between the parties, which pertained to referring the disputes that may arise between the parties to the arbitration. Since the dispute arose between the parties with regard to the execution of the contract in question, the applicant vide notice dated 9.9.09 invoking the arbitration clause, requested the respondents to settle the dispute amicably. The said notice was replied by the respondent No. 2 by the letter dated 29.9.09 denying the claims of the applicant. The applicant therefore again sent another notice on 8.10.09 to which the respondent No. 2 replied on 3.11.09. The applicant again sent notice dated 15.1.10 requesting to settle the disputes failing which to appoint the arbitrator in view of Clause 21.6 of the agreement. The respondent No. 2 replied to the said notice on 28.2.10 stating inter alia that in view of the undertaking given by the applicant on 10.2.08, the earlier agreement had stood terminated, and therefore the applicant was not entitled to invoke the clause for appointment of arbitrator. The applicant thereafter filed the present application under Section 11 of the said Act.

The application has been resisted by the respondents by filing the reply mainly contending inter alia that the applicant had suppressed the fact that the dispute was already amicably settled between the parties and the applicant had also given an undertaking on 11.12.08 treating the same as novation of the contract, and therefore the application was not maintainable. The applicant had filed the rejoinder denying any novation of the contract reiterating that the disputes between the parties still subsisted.

The learned counsel Mr. N.K. Maloo for the applicant relying upon the decision of the Apex Court in case of Gayatri Project Ltd. Vs. Sai Krishna Construction, submitted that where there is an arbitration clause in a contract, dispute has to be referred to the arbitration, notwithstanding the plea that there was a full and final settlement between the parties. According to Mr. Maloo, the respondents had got signed the undertaking from the applicant in the standard form and thereafter also had not acted as per the said settlement by not making payment towards full and final settlement. The said dispute therefore is required to be referred to the arbitrator.

However, The learned counsel Dr. P.C. Jain for the respondents relying upon the decisions of the Supreme Court in case of New India Assurance Company Ltd. Vs. Genus Power Infrastructure Ltd., and in case of Larsen and Toubro Ltd. Vs. Mohan Lal Harbans Lal Bhayana, submitted that when the original agreement was novated and the parties had acted accordingly, the arbitration clause in the original agreement cannot be invoked. He also submitted that the applicant having signed the undertaking as per the full and final settlement arrived at between the parties, the present application was not maintainable.

In the instant case, it is not disputed that originally the arbitration clause contained in the General Conditions of contract was made part of the agreement (Annex. 1). It is also not disputed that certain disputes having arisen between the parties during the execution of the contract in question, the notice correspondences had ensued between the parties. As such, the applicant has also not disputed the undertaking dated 11.12.08 (Annex. R-1/1) given by it, whereby it was stated inter alia that all matters under the contract were fully and finally settled in amicable manner and that by way of novation of earlier agreement, the applicant had agreed not to invoke the arbitration clause against the respondents for the appointment of the arbitrator or filing of suit. However, as per the contentions raised by the learned counsel for the applicant, there was no full and final settlement made between the parties, nor the respondents had made the payment to the applicant towards full and final settlement of his claims, and therefore the dispute still survived. It appears that after the said undertaking was given by the applicant, the respondents had made some payment and the applicant had accepted the amount of Rs. 3,69,556/-, under protest. As such, the learned counsel for the respondents has failed to point out any document to show that there was novation of contract or that the claim of the applicant was settled fully and finally in view of the said undertaking given by the applicant. Under the circumstances, as rightly relied upon by the learned counsel for the applicant on the decision of the Apex Court in case of M/s. Gayatri Project Ltd. (supra), since there was an arbitration clause in the agreement in question, the issue whether there was full and final settlement between the parties or not is required to be referred to the arbitrator.

In that view of the matter the present application deserves to be allowed and is allowed accordingly. Hon''ble Mr. Justice S.K. Keshote (Retd.) R/o 10, Eden Garden, Flat No. 302, Bajaj Nagar Enclave, Near Gandhi Nagar Railway Station, Jaipur-302015, is hereby appointed as the arbitrator to resolve the disputes between the parties. The cost of arbitration proceedings and the arbitration fees shall be as per the Rajasthan High Court Arbitration Manual. A copy of this order be sent to Hon''ble Mr. Justice S.K. Keshote (Retd.).