Telangana High Court
M/S Sri Laxmi Ganapathi Constructions vs M/S Singareni Collieries Company ... on 2 May, 2025
Author: K. Lakshman
Bench: K. Lakshman
HON'BLE SRI JUSTICE K. LAKSHMAN
ARBITRATION APPLICATION No.177 OF 2024
ORDER:
Heard Mr. M. Rama Krishna, learned counsel for the applicant and Mr. P. Sri Harsha Reddy, learned counsel for the respondent.
2. This application is filed under Section - 11 (5) & (6) of the Arbitration and Conciliation Act, 1996 (for short 'Act, 1996'), to appoint a sole Arbitrator to adjudicate the disputes/claims between the applicant and the respondent.
3. CONTENTIONS OF THE APPLICANT:
i) The respondent - M/s. Singareni Collieries Company Limited (SCCL) floated Tender Enquiry No.E141800480, dated 19.02.2019 for transportation of Coal from KTK-6 Incline & KLP Mine to KTK-5 CHP, Bhupalapally Area on weight basis for a period of two (02) years.
ii) The applicant - M/s. Sri Laxmi Ganapathi Constructions, Warangal, participated in the said Tender and stood as successful bidder. Therefore, the respondent has awarded the said work vide Work Order No.7600007834, dated 24.06.2019. They have also 2 KL,J Arb.Appl.No.177 of 2024 entered into an Agreement dated 30.07.2019 on the specific terms and conditions mentioned therein. The work was commenced from 24.06.2019 and it is going to expire by 23.06.2021.
iii) The said contract is based on the quantity of the coal provided to the applicant on the rates prescribed under the said contract. But, from the beginning of the contract, the respondent did not provide the minimum quantity of coal for transportation causing immense loss to the applicant.
iv) The respondent has abruptly stopped providing coal for transportation to the applicant. The respondent neither sent any communication nor assigned any reason for stopping the allocation of coal abruptly. Therefore, the applicant had submitted a letter dated 04.09.2020 to restore the contract and comply with the terms of the work order and agreement. The applicant also addressed several letters to the respondent demanding to settle the said dispute by paying dues and restore the original contract. There was no response from the respondent.
v) Since there was no response from the respondent to settle the dispute by way of negotiations, in the month of October, 2022, the 3 KL,J Arb.Appl.No.177 of 2024 respondent orally informed the applicant that they would not restore the contract and pay the forfeited amount on the ground that there is no explicit provision in the purchase order for refunding of forfeited and recovered amount. Therefore, the applicant has issued legal notice to the respondent demanding an amount of Rs.7,47,97,089/- towards damages for breach of contract along with forfeited amount of Rs.48,09,060/- within fifteen (15) days from the date of receipt of the said notice or in the alternative initiate arbitration proceedings for adjudication of disputes raised by the applicant within thirty (30) days. Despite receiving and acknowledging the said legal notice, there was no response from the respondent. Therefore, the applicant filed the present application seeking appointment of arbitrator to adjudicate the disputes.
4. CONTENTIONS OF THE RESPONDENT:
i) The respondent had filed counter admitting about the contract entered between the parties on 30.07.2019 and that the same is for a period of two (02) years. According to the respondent, the applicant has commenced the work on 03.07.2019. From the date of commencement of the contract, the applicant did not work smoothly, 4 KL,J Arb.Appl.No.177 of 2024 created lot of inconvenience to the Mines Authorities of respondent company by not deploying required number of trucks for transportation of coal as per Clause No.5.9 of the work order.
ii) The applicant has to transport 533 Tons per day from KTK-
6 and 800 Tons per day from KLP Mine. The applicant did not provide sufficient number of Lorries at KTK-6 and KLP Mine due to which coal was dumped at those places every day instead of transporting to the KTK-5 CHP that hampered the production badly. The SCCL failed to supply Coal to its customers and the contract was ended on 31.03.2020 due to non-transport of targeted production from KTK-6 and KLP Mine.
iii) The contract was closed early by SCCL on 31.03.2020 as there was no coal linkage provided in financial year 2021-22 by SCCL for admitting coal. The applicant applied for release of Security Deposit (SD)/EMD. The applicant performance could not meet the requirement of the Company and not satisfactory. Keeping in view the pre-closure of the contract period and in a sympathetic way, the SD/EMD amount was released and paid to the applicant. 5
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iv) Despite the requests made by the respondent to deploy sufficient number of lorries at KTK-6 and KLP mine to avoid dumping of coal, the applicant did not do so. The reasons for stoppage of the contract vide purchase order dated 24.06.2019 was intimated to the applicant orally.
v) The SD/EMD amount of Rs.10.00 lakhs was released and paid to the applicant vide cheque No.636435 dated 29.06.2020 i.e., before completion of contract period upon submission of application dated 11.05.2020 by the applicant, as such, the allegation of the applicant that she had no official communication rescinding the contract is false and baseless. The present application is not maintainable. The applicant did not follow the procedure laid down under the agreement and did not file the present application within 120 days on failure of negotiations. The present application is hopelessly barred by limitation. Therefore, there are no disputes between the applicant and the respondent to adjudicate.
5. Both learned counsel for the applicant and respondent made their submissions extensively.
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KL,J Arb.Appl.No.177 of 2024 ANALYSIS AND FINDINGS OF THE COURT:
6. The aforesaid rival submissions would reveal that the respondent is opposing the present application on the following grounds:
i. The present application is barred by limitation; ii. The applicant did not follow the procedure laid down under Clause - 10 of the work order dated 24.06.2019 and the agreement bond dated 30.07.2019;
7. There is no dispute that the respondent has issued tender dated 19.02.2019 for transportation of coal from KTK-6 Incline and KLP Mine to KTK-5 CHP, Bhupalapalli on weight basis for a period of two (02) years. The applicant participated in the said tender and stood as successful bidder. The respondent has issued work order dated 24.06.2019, and both the applicant and respondent have entered into an agreement on 30.07.2019 on the specific terms agreed therein. According to the applicant, it has commenced the work from 24.06.2019, whereas, according to the respondent, the applicant has commenced the work from 03.07.2019.
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8. It is the specific contention of the applicant that it has executed the work strictly in accordance with the agreement dated 30.07.2019. According to the respondent, the applicant did not deploy sufficient number of trucks for transportation of coal at KTK-6 and KLP Mine to avoid dumping of coal. The performance of contract by the applicant could not meet the requirement of the respondent. The applicant did not provide the loaders as required at the respective mines. Therefore, the respondent has closed the contract on 31.03.2020 itself.
9. As discussed above, the agreement is dated 30.07.2019 and the last payment was made on 29.06.2020. The respondent has also paid the SD/EMD amount of Rs.10.00 lakhs to the applicant vide cheque bearing No.636435, dated 29.06.2020. According to the applicant, the respondent stopped providing coal without assigning any reasons and without issuing any notice. The applicant submitted a letter dated 04.09.2020 to the respondent with a request to provide coal and not to stop the same abruptly. The applicant also issued similar letters dated 20.10.2021 and 30.12.2021. Vide letter dated 17.09.2022, the respondent replied to the applicant that the respondent 8 KL,J Arb.Appl.No.177 of 2024 withheld/forfeited an amount of Rs.48,09,060/- as per the terms and conditions of respective purchase orders and there is no explicit provision in the said purchase orders for refunding the forfeited/recovered amount. Therefore, vide notice dated 08.04.2024, the applicant requested the Chairman and Managing Director of the respondent to intervene/pay an amount of Rs.7,47,97,089/- towards damages for the breach of contract along with the forfeited amount of Rs.48,09,060/-. Despite receiving and acknowledging the said notice, there was no response from the respondent.
10. In the light of the aforesaid submission, it is relevant to note that in Bharat Sanchar Nigam Limited v. Nortel Networks India Private Limited. 1, the Hon'ble Supreme Court held that the High Court being the referral Court may refuse to refer to arbitration only in rare and exceptional cases where claims are manifestly time barred.
11. In NTPC Ltd., v. SPML Infra Ltd. 2, the Apex Court clarified that while the limitation for filing under Section - 11 of the Act, 1996 is three (03) years under Article - 137 of the Limitation 1 . (2021) 5 SCC 738 2 . (2023) 2 SCR 846 9 KL,J Arb.Appl.No.177 of 2024 Act, the issue of whether the underlying claims are time barred is for the arbitral Tribunal to decide.
12. In Aslam Ismail Khan Deshmukh v. Asap Fluids Private Limited 3 placing reliance on its earlier judgments, in paragraph No.43, a Three-Judge Bench of the Apex Court held that while determining issue of limitation in the exercise of powers under Section
- 11 (6) of the Act, 1996, referral Court must only conduct a limited enquiry for the purpose of examining whether Section - 11 (6) application has been filed within the limitation period of three (03) years or not. At this stage, it would not be proper for the referral Court to indulge in an intricate evidentiary enquiry into the question of whether the claims raised by the petitioner are time-barred and such a determination must be left to the decision of the arbitrator. It further held that in a scenario where the referral Court is able to discern the frivolity in the litigation on the basis of bare minimum pleadings, it would be incorrect to assume or doubt that the Arbitral Tribunal would not be able to arrive at the same inference, especially when 3 . (2025) 1 SCC 502 10 KL,J Arb.Appl.No.177 of 2024 they are equipped with the power to undertake an extensive examination of the pleadings and evidence adduced before them.
13. In the light of the aforesaid principle laid down by the Apex Court, coming to the facts of the present case, as discussed above, the applicant and the respondent have entered into the agreement dated 30.07.2019, and it is for a period of two (02) years. According to the applicant, the respondent stopped providing coal abruptly without any reasons and without issuing any notice. Therefore, the applicant has submitted a letter dated 04.09.2020 to the respondent to provide coal. The respondent did not provide the coal. Even according to the respondent, the contract was closed by it on 31.03.2020 and it has paid the SD/EMD amount vide cheque No.636435, dated 29.06.2020. The applicant had submitted letters dated 20.10.2021 and 30.12.2021 to the respondent with a request to provide coal, negotiate and settle the disputes. Vide letter dated 17.09.2022, the respondent informed the applicant that it has withheld/forfeited the said amount of Rs.48,09,060/- as per the terms and conditions of the purchase orders and there is no explicit provision in the said purchase orders for refunding the forfeited/recovered amount. Even in the counter filed 11 KL,J Arb.Appl.No.177 of 2024 by the respondent, it is specifically mentioned that the reasons for stoppage of the contract vide purchase order dated 24.06.2019 was intimated to the applicant orally. Therefore, there is continuous cause of action. The applicant filed the present application on 19.07.2024. Thus, it cannot be termed as manifestly time barred. Even the aspect of delay/limitation can be considered by the Arbitrator himself. In the light of the aforesaid discussion, this Court is of the considered view that the present application is not manifestly time barred and it is not a rare and exceptional case to dismiss the present application.
14. As discussed above, there are disputes between the applicant and the respondent with regard to the following aspects:
i) According to the applicant, it has commenced the work from 24.06.2019, whereas according to the respondent, the applicant has commenced the work from 03.07.2019;
ii) According to the respondent, the applicant did not work smoothly and created lot of inconvenience to the mine authorities of the respondent by not deploying required number of trucks for transportation of coal as per Clause No.5.9 of the work order;12
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iii) Performance of the applicant could not meet the requirement of the Company and not satisfactory; and
iv) Applicant did not provide the loaders as required at the respective mines etc. Therefore, the said aspects are factual aspects, arbitral disputes which the Arbitrator has to consider. Thus, this Court is of the considered view that there are disputes between the applicant and the respondent and the same are arbitrable in nature.
15. With regard to the contention of the respondent that the applicant did not follow the procedure laid down in Clause - 10 of the Purchase Order, it is relevant to extract the same which is as under:
"10. ARBITRATION:
Normally all disputes should be settled by negotiations between the Company and the concerned parties.
In case any dispute / difference is not settled through negotiations, the respective parties can seek remedy through Arbitration only by invoking the same within 120 days of raising of dispute. No disputes shall be referred to civil courts other than/through Arbitration.13
KL,J Arb.Appl.No.177 of 2024
(a) In case of any dispute Sole Arbitrator shall be appointed from the list of 3 judicial officers maintained by SCCL duly following the provisions of Arbitration and conciliation act 1996 as amended from time to time: The list of such names shall be forwarded to the party as and when the party requests for resolving the dispute. Such Judicial Officer as chosen by the party will be appointed by the Chairman & Managing Director to adjudicate the dispute as a Sole Arbitrator. The Arbitrator so appointed shall conduct the proceedings in accordance with the Arbitration & Conciliation Act, 1996 as amended from time to time and pass a reasoned award. Both the parties should bear the cost of the arbitration equally.
(b) If the Sole Arbitrator appointed by the Chairman & Managing Director of the Singareni Collieries Company Limited is unable to continue as an Arbitrator for any reasons to be recorded in writing and the Chairman& Managing Director of Singareni Collieries Company Limited thinks fit for appointment of a new Arbitrator in the place of existing Arbitrator, he is having a power to do so.
Such new Arbitrator shall be appointed following the same procedure as contemplated in (a) above.
(c) As and when such new Arbitrator is appointed, he can either continue the arbitration proceedings from 14 KL,J Arb.Appl.No.177 of 2024 the stage where the earlier Arbitrator discontinued his proceedings or alternatively the new Arbitrator may start proceedings de novo if the circumstances warrant him to do so.
(d) Failing to invoke Arbitration Clause within 120 days of dispute (from the date of the raising of the dispute) it is deemed that there is no dispute between the parties. No disputes shall be entertained in any form and on any matter pertaining to contract after expiry of 120 days of the period.
(e) The expenses payable to the Sole Arbitrator shall be governed by the Arbitration & Conciliation Act, 1996 as amended from time to time and shall be borne equally by both parties to the dispute."
16. As per the said clause, in case any dispute/difference is not settled through negotiations, the respective parties can seek remedy through Arbitration only by invoking the same within 120 days of raising of dispute. No dispute shall be referred to Civil Courts other than through Arbitration.
17. As discussed above, the respondent stopped supply of coal to the applicant. According to the respondent, it has informed the reasons to the applicant orally. According to the applicant, the 15 KL,J Arb.Appl.No.177 of 2024 respondent did not inform the applicant about stoppage of coal and without assigning any reasons and without issuing notice, the respondent stopped supply of coal to the applicant. Therefore, the applicant has given a letter dated 04.09.2020 to the respondent with a request to provide coal and restore the contract. Despite receiving and acknowledging the said letter and so also the notice dated 08.04.2024, there was no response from the respondent. The applicant has submitted two more letters dated 20.10.2021 and 30.12.2021 with similar request and the applicant also requested the respondent to settle/resolve the disputes. The respondent has sent letter dated 17.09.2022 to the applicant stating that there is no explicit provision to refund the forfeited amount. However, the said aspect is an arbitrable dispute and it is for the Arbitrator to consider the same.
18. This Court being referral Court has to see the existence of agreement and arbitration clause. In the present case, there is an agreement and arbitration clause. Other aspects will be considered by the Arbitrator.
19. In the light of the aforesaid discussion, this Court is of the considered view that there are disputes between the applicant and the 16 KL,J Arb.Appl.No.177 of 2024 respondent which are arbitrable in nature to be adjudicated by an Arbitrator.
20. The present arbitration application is accordingly allowed, and Sri Justice M. Seetharama Murti, Former Judge, High Court of Andhra Pradesh at Amaravati, R/o Flat No.602, 'A' Block, White House Apartments, H.No.8-2-674/2 & 2A, Road No.13, Banjara Hills, Hyderabad, Telangana State - 500 034 (Mobile # 9440405308 & email Id: [email protected]), is appointed as an Arbitrator to adjudicate the disputes between the applicant and the respondent. Liberty is granted to both the parties to raise all the contentions and grounds which they have raised in the present application before the learned Arbitrator and it is for the learned Arbitrator to consider the same. In the circumstances of the case, there shall be no order as to costs.
As a sequel thereto, miscellaneous applications, if any, pending in the Arbitration Application shall stand closed.
_________________ K. LAKSHMAN, J 2nd May, 2025 Mgr