Vipin Bhimlal Shah vs Slum Rehabilitation Authority
2017 Latest Caselaw 8084 Bom

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              IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                ORDINARY ORIGINAL CIVIL JURISDICTION

              ARBITRATION APPLICATION NO. 251 OF 2015


Vipin Bhimlal Shah                                          ...Applicant

       Versus

Slum Rehabilitation Authority                               ...Respondent


Mr.Sumi Soman, for the Petitioner.

Mr.Jagdish G.(Aradwad) Reddy, for the Respondent.
                                            ---

                                     CORAM          :   G. S. KULKARNI, J.

                                 RESERVED ON        :   23rd August,2017
   
                            PRONOUNCED ON  :   12th October,2017

JUDGMENT :

1. By this application under Section 11(6) of the Arbitration and

Conciliation Act,1996 (for short 'the Act') the applicant is seeking

appointment of an arbitrator for adjudication of the disputes that have

arisen between the applicant and the respondent.

2. The case of the applicant is that he is a sole proprietor of Vipin

Shah & Associates and is carrying on business as Turn-key contractor. The

respondent is the Slum Rehabilitation Authority constituted under the

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Maharashtra Slum Area (Improvement, Clearances and Development)

Act,1971. The respondent had invited tenders for carrying out the work of

refurbishment of the SRA administrative building. The applicant was one

of the bidders and his tender was accepted by the respondent. The

applicant mobilised necessary resources for commencement and

completion of the work under the contract. The work could not be

completed within the stipulated date of completion due to various defaults

and failures on the part of the respondent and due to various breaches of

contract committed by the respondent as alleged by the applicant, though

the work under the contract was satisfactorily completed by the applicant.

The final bill for the same was submitted by the applicant. The contention

of the applicant is that the final bill as submitted by the applicant was

illegally changed by the architect appointed by the respondent by making

various incorrect deductions which were not acceptable to the applicant.

The applicant was informed that due payment of the applicant could not be

released unless the applicant accepts the final bill as changed by the

architect. In the said circumstances, the applicant was constrained to sign

the corrected bill as changed by the architect. The applicant contends that

despite long lapse of time after the completion of the work, the respondent

failed and neglected, to finalize the accounts of the applicant. The

applicant therefore addressed a letter dated 30 September 2013 to the

respondent listing out the various amounts due and payable to the

applicant by the respondent and called upon the respondent to settle and

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pay the said amounts. The respondent, however, failed and neglected to

comply with the said request of the applicant. The respondent thereafter

addressed a letter dated 9 December 2013 to the applicant raising various

contentions which came to be denied by the applicant by his letter dated

10 December 2013. The applicant contends that as the applicant was

financially handicapped and in dire need of money, the applicant had no

option but to address a letter dated 16 December 2013 to the respondent

enclosing therewith a no dues certificate as required by the respondent. It

is stated that, even thereafter the respondent refused to release payments

to the applicant. The applicant contends that thereafter the applicant under

severe economic duress and coercion was required to furnish the

undertaking dated 7 January 2014, the contents of which were neither

acceptable to the applicant nor agreeable to the applicant. The

undertaking and/or no dues certificate was issued by the applicant to the

respondent at the instance of the respondent and which was subject to the

conditions recorded therein, contended to be a precautionary measures

adopted by the applicant. By a communication dated 16 January 2014 the

applicant immediately informed the respondent that the undertaking has

been furnished by the applicant under economic duress and financial

constraints and therefore, the same is not valid and effective as the

respondent had not acted in accordance with the obligations recorded in

the undertaking. The applicant also recorded that since the disputes and

differences have arisen between the parties, the applicant was left with no

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option but to invoke the arbitration clause and accordingly requested that

the disputes be referred for arbitration. However, despite lapse of 30 days,

the respondent failed to appoint an arbitrator. The case of the applicant is

that the applicant is entitled to the following claims:-

  Sr.no.                              Particulars                                    Amount
1          Towards value of work executed by the applicant                       Rs.2,73,02,919/-
2          The amount incorrectly short paid by the respondent while                   Rs.99,591/-

releasing payments against 3rd, 4th and 4th R.A.Bills. 3 Towards escalation for additional expenses incurred by the Rs.1,41,84,613/-

applicant 4 For quantities of items which exceeded their reasonable Rs.2,41,31,845/-

deviation limits.

3. The applicant in seeking a relief that this Court appoint an

arbitrator in exercise of its jurisdiction under Section 11(6) of the Act,

refers to clause 96 of the General Conditions of the Contract being the

arbitration agreement between the parties which reads thus:-

"Clause 96:-

If any dispute arise in respect of present contract it will be referred to the sole arbitrator nominated by Chief Executive Officer, Slum Rehabilitation Authority and said sole arbitrator will be Secretary Housing Mantralaya or any officer of the same rank. And the decision of the arbitrator will be final and binding on the both the parties. And the procedure of the arbitration will be conducted as per the provisions of Arbitration and Conciliation Act,1996."

The learned Counsel for the applicant has placed reliance on

the decisions of the Supreme Court in the case "Chairman and M.D.,

NTPC Ltd. Vs. Reshmi Constructions, Builders and Contractors"1; and the

1 AIR 2004 SC 1330

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decision in "National Insurance Company Ltd. Vs. Boghara Polyfab

Pvt.Ltd."2 to contend that the plea as raised on behalf of the respondent,

of the applicant having received the amounts in full and final settlement,

cannot be accepted to be conclusive to dismiss the present application and

such issues are required to be agitated in the arbitration proceedings.

4. The respondent has appeared as also has filed a reply affidavit

opposing this petition. The respondent does deny that the contract in

question was awarded to the applicant for refurbishment of the SRA

administrative building. It is contended that for the reasons as set out in

paragraph 7 of the reply, the respondent has paid the entire bill amount to

the applicant. It is also contended that it was the applicant who had failed

to complete the project as per the terms and conditions of the contract

within the stipulated time. The respondent contends that in view of the

registered undertaking dated 7 January 2014 as furnished by the applicant,

it is clear that the applicant has received the amount in full and final

settlement under the contract and no amount is due and payable to the

applicant. The respondent, thus contends that the petition be dismissed. In

support of his contention the respondent has relied on the decision of the

Supreme Court in the case "New India Assurance Company Ltd. Vs.

Genus Power Infrastructure Ltd."3

2 AIR 2009 SC 170 3 2015(6) Mh.L.J. 545 Supreme Court

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5. I have heard the learned Counsel for the parties and with their

assistance I have gone through the pleadings and the documents as placed

on record. It is not in dispute that the applicant was awarded a contract for

refurbishment of the SRA administrative building. It is also not in dispute

that the applicant had undertaken the work and that the contract came to

be completed, however, according to the respondent on a delay, and not

fully complying with the terms and conditions of the contract.

6. Be that as it may, Clause 96 of the General Conditions of the

contract executed between the parties, is not in dispute. A bare reading of

the above clause clearly indicates that it is an arbitration agreement. All

the necessary requisites for the parties agreeing to refer the disputes for

arbitration stand satisfied in Clause 96, to come to a conclusion that there

exists a valid arbitration agreement between the parties.

7. In view of insertion of sub-section 6-A to Section 11 of the Act

by the 2015 Amendment Act, with effect from 23 October 2015, it is clear

that the obligation of the Court while considering an application under

Section 11(6), shall be confined to the examination of existence of the

arbitration agreement, and which shall be, notwithstanding any judgment,

decree or order of any Court. Section 11(6-A) reads thus:-

"11. Appointment of arbitrators:.. ...

(6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under

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sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."

8. Considering the above amended provision of the Act, though

the respondent relying on the undertaking dated 7 January 2014 contends

that the applicant has received the amounts in full and final settlement, in

my opinion, this plea cannot be accepted, and more particularly in the facts

as noted above. This for the reason that prima facie a perusal of the

undertaking dated 7 January 2014 does not give an impression that there

is a conclusive settlement between the parties. Significantly, on issuance of

the said undertaking, the applicant immediately by his letter dated 16

January 2014 recorded that the undertaking was submitted by the

applicant under economic duress and coercion. If this is the factual

position, then, necessarily as to whether the applicant has received

amounts in full and final settlement is a matter which required to be

agitated by the parties in the arbitration proceedings and to be decided by

the arbitral tribunal. (See: "Chairman and M.D., NTPC Ltd. Vs. Reshmi

Constructions, Builders and Contractors" (supra) and "National

Insurance Company Ltd. Vs. Boghara Polyfab Pvt.Ltd." (supra))

9. In any event, as noted above, in view of incorporation of

Section 11(6-A), the Court need not delve on this issue, as the only

necessary consideration for the Court in exercising jurisdiction under

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Section 11(6) would be to examine 'whether there is an arbitration

agreement between the parties. In the present case, it is not in dispute that

there is an arbitration agreement and, therefore, it would be appropriate

that the parties are left to agitate their respective pleas, to be adjudicated

before the arbitrator.

10. In the facts of the present case, the reliance on behalf of the

respondent on the decision in New India Assurance Company Ltd. Vs.

Genus Power Infrastructure Ltd. (supra), in my opinion is not well

founded. In the said case, considering the averments of the respondent as

made in paragraph 9 of the petition, the Court was of the view that the

plea raised by the respondent was bereft of any details and particulars, and

were merely bald assertions. It was also observed that there was no protest

or demur raised around the time or soon after the letter of subrogation was

signed. However, the facts of the present case are completely different. The

applicant here had immediately protested against the purported

undertaking of settlement. Further a bare reading of the undertaking,

prima facie leaves some manner of doubt about the nature of the

settlement to be a final settlement

11. In the circumstances, I propose to appoint Mr.Justice P.D.Kode

(Retired) as the Sole Arbitrator to adjudicate the disputes between the

parties. In the first instance, the proposed arbitrator shall make a

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disclosure in terms of Section 11(8) read with Section 12(1) of the Act and

thereafter enter upon the reference. In the event, the disclosure is not made

within a reasonable time or the disclosure records the inability of the

proposed arbitrator to act as such, it will be open to the parties to apply to

this Court for directions. The parties will appear before Mr.Justice P. D.

Kode (retired), on a date to be fixed by His Lordship, which be informed to

the parties at least 15 days in advance.

12. The arbitration application is disposed of in the above terms.

No order as to costs.

13. A copy of this order be forwarded to Hon'ble Mr.Justice

P.D.Kode (Retired).

(G.S.Kulkarni, J)