Shri Patil Enterprises vs General Manager, South Central Railway and Others

G. Rohini, J.—This application is filed u/s 11(6) of the Arbitration and Conciliation Act, 1996 with a prayer to appoint an arbitrator to resolve the dispute between the applicant and the respondents, arising out of the agreement No. 42/DEN/South/HYB, dated 06-02-2008. The material available on record shows that in response to the tender notification dated 9-8-2007 issued by the respondents inviting tenders for the work of "Supply and stacking of 50mm gauge machine crushed stone ballast at Falaknuma depot (Depot collection) and loading into railway Wagons/Hoppers", the applicant herein had participated and he was declared as the successful bidder. Accordingly, letter of acceptance dated 7-12-2007 was issued by the 3rd respondent and thereafter and agreement dated 6-2-2008 was entered into between the parties. However, the applicant could not make the supplies as per the schedule agreed upon. Despite various notices/reminders as there was no progress, the 3rd respondent by letter dated 01-04-2008 terminated the contract and forfeited the performance guarantee by invoking the clause 22 of General Conditions of Contract. Pursuant thereto the respondents by letters dated 18-04-2008 and 03-06-2008 called upon the applicant to remove the stacked ballast failing which the same would be disposed in accordance with the existing procedure. In the circumstances, the applicant got issued a legal notice dated 8-9-2008 calling upon the respondents to withdraw the termination order dated 01-04-2008 calling upon the respondents to withdraw the termination order dated 01-04-2008 and to stop the action initiated by letters dated 18-04-2008 and 03-06-2008." The applicant had also requested the respondents to refer the matter to arbitration under Rules 63 and 64 of General Conditions of Contract and filed an arbitration claim before the 1st respondent on 09-02-2009. The said request of the applicant was rejected by the 1st respondent by letter dated 10-06-2009 on the ground that the claims preferred by the applicant exceeded the specific limit provided under clause Nos. 1, 2 and 3 of Special Conditions of Contract. Hence, the present application u/s 11(6) of the Arbitration and Conciliation Act, 1966 for appointment of a sole arbitrator for adjudication of the disputes between the parties.

On behalf of the respondents a counter affidavit is filed denying all the allegations made by the applicant and contending inter alia that the arbitration application itself is not maintainable since the claims put forth by the applicant for adjudication through arbitration exceeded the value of more than 20% of the original agreement value.

I have heard the learned counsel for the applicant as well as the learned standing counsel appearing for the respondents.

Having regard to the preliminary objection raised by the learned counsel for the respondents as to the maintainability of the arbitration application, the first question that requires consideration is whether the applicant can maintain the present application u/s 11(6) of the Act.

Admittedly, the Special Conditions of Contract, which form part of the contract between the applicant and the respondents contained specific clauses as under:

The provision of Clause 63 and 64 of the General Conditions of Contract will be applicable only for settlement of claims/disputes for values less than or equal to 20% of the original value (excluding the cost of materials supplied free by Railway) of the contract or 20% of the actual value of the work done (excluding the value of the work rejected) under the contract whichever is less. When claims/ disputes are of value more than 20% of the value of the original contract or 20% of the value of the actual work done under the contract, whichever is less, the contractor will not be entitled to seek such disputes/claims for reference to arbitration and the provisions of Clause No. 63 and 64 of the General Conditions of Contract will not be applicable for referring the dispute to be settled through arbitration.

The Contractor shall furnish his monthly statement of claims as per Clause 43(1) of General Conditions of Contract. But, the Contractor should seek reference to arbitration to settle the disputes only once, subject to the conditions as per Para 1.

The Special conditions shall prevail over the existing Clause 63864 of General Conditions of Contract.

A plain reading of the above clauses shows that clauses 63 and 64 of the General Conditions of Contract, which enable the contractor to seek arbitration for settlement of disputes are not applicable if the claim of the contractor is in excess of 20% of the contract value.

The fact that the claim of the applicant in the present case is in excess of 20% of the contract value has not been disputed before this Court. That being so, the dispute raised by the applicant is not arbitrable.

In identical circumstances, this Court in Sai Engineering Contractors Vs. General Manager, South Central Railway and Others, upheld the objection raised by the respondents therein and concluded that the dispute raised by the applicant therein was not arbitrable in view of the specific cause contained in Special Conditions of Contract.

The said decision was rendered by this Court following the law laid down in State of Andhra Pradesh v. Obulu Reddy (2001) 10 SCC 30 and Deepak Kumar Bansal Vs. Union of India (UOI) and Another,

The contract, which is the subject matter of the present application also contained the very same clause which was considered by this Court in Sai Engineering Contractors''s case (1 supra).

In the circumstances, the ratio laid down therein is squarely applicable to the case on hand. Therefore, it is not necessary to go into the merits of the case and the arbitration application is liable to be dismissed as not maintainable. Accordingly, the Arbitration Application is hereby dismissed. No costs.