M/S Vishwakna Enterprises, ... vs Sree Rayalaseema Histrength Hypo ...
2022 Latest Caselaw 9648 AP

       THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

           ARBITRATION APPLICATION No.58 of 2015


ORDER:

The case of the applicant is as follows:

2. The applicant had entered into an agreement with the

respondent for executing certain Civil, Structural and Plumbing

works in the establishment of the respondent at Kurnool by way of

an agreement, which is contained in the work order awarded by the

respondent dated 22.09.2010.

3. The applicant states that it took up the work and

executed the work. However, payments due to the applicant were not

made. The applicant was due for Rs.19,55,580/- towards the unpaid

dues and a sum of Rs.7,22,541/- towards non returning of retention

money to the applicant. In all, the applicant claims Rs.26,78,127/-

being the amounts due on account of non settlement of these

amounts. The applicant further contends that material of the

applicant, lying at the works place, was used by the respondent

company without reimbursing the applicant. The applicant claims

that a sum of Rs.78,28,600/- has to be paid to the applicant on this

account. The applicant also contends that the respondent would be

liable to pay a sum of Rs.31,13,344/- as the amount of the rents

liable to be paid by the respondent for using the material in the

construction. In all, the applicant claims an amount of

Rs.1,28,97,530/- as being due to the applicant.

4. The applicant raised the issue of payment of these dues

in its legal notice dated 24.04.2014 sent to the respondent. The said

notice also stated that if the amounts are not settled within 15 days

and the applicant is not allowed to retrieve its material, the matter

should be referred to an Arbitrator consented by both parties. As the

respondent neither paid the said amounts nor referred the matter for

arbitration, the present application has been filed under Section 11

of the Arbitration Conciliation Act, 1996 for appointment of an

arbitrator.

5. The respondent has filed a counter affidavit stating that a

work order was placed on the applicant on 17.09.2010 for

construction of Multi Storied Industrial Calcium Hypo Chlorite

Building. According to the said work order, work was to be

commenced on 22.09.2010 and completed by 22.07.2011. The said

work was not executed completely and the applicant started making

unsustainable claims to avoid liquidated damages. The respondent

denied any liability to pay any amount of money to the applicant. The

respondent also contended that the claim for the alleged use of

material of the applicant and the rent claimed on the said use of the

material would be outside the purview of the work order dated

17.09.2010 and as such, the applicant cannot seek reference of the

said claims to arbitration.

6. The respondent has taken the stand that it is the

applicant who was due to the respondent and the applicant had in

fact requested the respondent to waive the said debit balance. The

respondent has disputed the maintainability of the present

application on the ground that the legal notice dated 24.04.2014 is

barred by limitation as the schedule date of completion was

22.07.2011. The respondent also contends that there was final

accord and satisfaction in view of the letters of the applicant dated

14.03.2014 and the subsequent E-mails dated 12.06.2014 and

17.06.2014.

7. The respondent contends that the letter dated

14.03.2014, given by the Managing Director of applicant requests the

respondent to remove the debit balance and to allow the applicant to

take back the material at the site and that this would be the final

settlement arrived between the parties. The E-mails exchanged

between the applicant and the respondent between 12.04.2014 and

26.004.2014 shows that the respondent treated the letter dated

14.03.2014 as full and final settlement of all dues and claims

between the parties. However, the E-mail of 26.04.2014 shows that

the applicant had disputed this view of the respondent apart from

disputing the fact stated by the respondent in the E-mails sent by

the respondent to the applicant.

8. Sri N.Pramod learned counsel appearing for the applicant

would submit that the claims made by the applicant have been

denied by the respondent and as such, disputes have arisen between

the parties. He relies upon special condition clauses 42 and 43 to

contend that all disputes between the parties would have to be

resolved by way of arbitration if resolution, by mutual consultation,

does not happen.

9. Sri S.S.Bhatt learned counsel appearing for the

respondent reiterates the objections raised in the counter affidavit,

about the maintainability of the application itself.

10. The question of whether any amounts are due from the

respondent to the applicant and whether any amounts are due from

the applicant to the respondent are matters of dispute which would

have to be resolved, as per the terms of the work order, which

provides for reference to Arbitration. The respondent has raised

objections as to whether such reference is permissible.

11. The first objection of the respondent is that the claim is

barred by limitation. The execution of the contract was to be

completed by 22.07.2011. The applicant had issued a legal notice

dated 24.04.2014 setting out its claims and asking for reference to

arbitration. This letter is within three years from the schedule date of

completion. Section 21 of the Arbitration Act stipulates that issuance

of a notice requesting arbitration would be treated as the date on

which the arbitral proceedings have commenced. It is not clear as to

which period of limitation is to be applied and how the claim and

request for Arbitration is barred. In any event, without taking a final

view on this aspect, the fact remains that the question of limitation is

a mixed question of law and fact and the same can be referred to the

arbitral Tribunal for a decision.

12. The second objection raised by the respondent is that

there is a final settlement in relation to the work order and

consequently the present application is not maintainable. The

learned counsel for the applicant relies upon the following decisions

to support his contention.

1) M/s. P.K Ramaiah and Company vs Chairman & Managing

Director, national Thermal Power Corporation.1

2) Union of India and Others vs. Master Construction Company2

1994 Supp (3) SCC 126

3) Sri Matha Manikeshwari Enterprises vs. General Manager,

South Central Railway, Secunderabad and Others3

4) Indian Oil Corporation Limited vs. NCC limited4

5) Secunderabad Cantonment Board vs Ramachandraiah and

Sons5.

13. In all these Judgments, the Court had taken the view

that, where there is full accord and satisfaction of the claims, further

arbitral proceeding including applications for appointment of an

Arbitral Tribunal would not be maintainable. However, the question

that would still remain before this Court is whether there was such

final settlement of dues between the parties.

14. The case of the respondent is that the letter dated

14.03.2014 given by the Managing Director of the applicant amounts

to a final settlement. The applicant disputes this contention.

15. The E mail communications between the applicant and

the respondent between 12.06.2014 and 17.06.2014 reveals that the

letter of 14.03.2014 is treated, by the respondent, as an offer of full

and final settlement. However, the applicant states in his E-mail

dated 26.06.2014 that there was no final settlement. The Applicant

(2011) 12 SCC 349

2015 (1) ALD 431

2022 SCC online SC 896

(2021) 5 SCC 705

also contends that, even otherwise, nothing has been shown to

demonstrate that the respondent, in pursuance of the alleged final

offer of the applicant, had taken the necessary steps to return all the

material of the Applicant. This has itself become a disputed question

of fact which would have to be looked into by the arbitrator.

16. The Respondent also contends that the claim of

compensation for alleged consumption of the material of the

Applicant and the rents claimed on that account fall outside the

purview of the contract and the arbitration clause in clauses 42 and

43 of the special conditions set out in the work order. The said

clauses read as follows:

17. In these circumstances, this is a fit case for the dispute

to be referred to Arbitration.

18. Accordingly, this Arbitration Application is allowed and

Justice Smt. Kongara Vijaya Lakshmi, Former Judge of the High

Court of Andhra Pradesh, Plot No.9/B, Road No.7, Filmnagar,

Jubilee Hills, besides Filmnagar Cultural Center, Hyderabad is

appointed as the Arbitrator to decide the claims made by the

applicant in the legal notice dated 24.04.2014. The learned

Arbitrator shall fix her fees in accordance with the 4th schedule to the

Arbitration and Conciliation Act, 1996. The arbitration shall proceed

in accordance with clauses 42 and 43 of the work order dated

17.09.2010. There shall be no order as to costs.

Miscellaneous petitions, pending if any, shall stand closed.

___________________________________ JUSTICE R.RAGHUNANDAN RAO Date :15.12.2022 RJS

THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

ARBITRATION APPLICATION No.58 of 2015

Date : 15.12.2022

RJS