Rail India Technical And Economic ... vs The Director, M/S. Ujjani ...
2017 Latest Caselaw 7213 Bom

(Judgment) 1509  MCA 243-2017                                                                            1/13

                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
                               NAGPUR BENCH AT NAGPUR.


                            MISC. CIVIL APPLICATION NO. 243/2017




                Rail India Technical and Economic Services
                (RITES Ltd.),
                (Scheduled - A Enterprises of Govt. of India)
                Through it's General Manager,
                RITES Bhavan, Kadbi Chowk, Nagpur.                                    APPLICANT


                                                   .....VERSUS.....


                The Director,
                M/s. Ujjani Highways Pvt. Ltd.,
                "Vidyadeep" 15/3, Manorama Ganj,
                Indore (Madhya Pradesh) 452001.                                       NON-APPLICANT


                Shri Nitin P. Lambat, counsel for applicant.
                Shri Rahul D. Dhande, counsel for non-applicant/respondent.


                                CORAM:  S.B. SHUKRE, J.

                                DATE    : SEPTEMBER 15, 2017.
                 

                                ORAL JUDGMENT :  


                                                     Heard. 



                                     2]              Rule. Rule made returnable forthwith.



                                     3]              Heard finally by consent.



 (Judgment) 1509  MCA 243-2017                                                                        2/13

                                4]            In the instant case, there is a serious dispute

regarding existence of arbitration clause in the

agreement dated 22/07/2014 executed between the

parties. By this agreement, the respondent engaged

consultancy services of the applicant for supervision of

road overbridge. A dispute arose between the parties

regarding payment of various bills raised by the

applicant for the consultancy services offered to and

availed of by the respondent. According to the applicant,

such dispute was arbitrable as per the arbitration clause

and also it issued a notice dated 16/08/2016 to the

respondent calling upon it to either make the payment of

the bills or refer the dispute for arbitration. However,

reply that was sent by the respondent to the applicant,

was in the negative. Therefore, this application has been

filed by the applicant and now dispute has been raised

by the respondent about existence of arbitration clause.

5] According to Shri Lambat, learned counsel for

applicant, arbitration clause, clause (10) of the

agreement dated 22/07/2014, is clear enough and it

makes dispute between the parties as arbitrable, which is

(Judgment) 1509 MCA 243-2017 3/13

however, not agreed to by Shri Dhande, learned counsel

for the respondent. According to him, the Hon'ble

Supreme Court in it's various cases has interpreted a

similar clause and held that, "The clause makes the

dispute as inarbitrable and therefore, only Civil Court will

have the jurisdiction". He has placed his reliance upon

the following cases.

(i) Eastern Coalfields Ltd. -Vs- Sanjay Transport Agency and another, 2009(8) Scale 720.

(ii) Northern Coalfields Ltd. -Vs- Heavy Engineering Corporation Ltd. and another, 2016(8) SCC 685.

(iii) Saipem Triune Engineering Pvt. Ltd. -Vs- Indian Oil Petronas Pvt. Ltd., 2011 DGLS (Del.) 4782.

(iv) Engineering Projects (India) Ltd. -Vs- Steel Authority of India Ltd., 2017 DGLS (Del.) 248.

6] As there has been a difference of opinion

between the parties regarding existence or otherwise of

the arbitration clause, it would be useful for us to

reproduce the arbitration clause contained in the

agreement dated 22/07/2014. It reads, thus :

 (Judgment) 1509  MCA 243-2017                                                                      4/13


                                10.0        Arbitration :

If at any time any question, dispute on difference whatsoever shall arise between the M/s. UHPL and the RITES Ltd. with regard to or in relation to or in connection with the offer, whether during the progress of the work or after its completion, the provisions of Govt. of India, Ministry of Industry, Department of Public Enterprises Notification No. 3/5/93-PMA, dt. 30/06/1993 or its amendments for arbitration shall be applicable. This is reproduced as below:

"IN THE EVENT OF ANY DISPUTE OR DIFFERENCE RELATING TO THE INTERPRETATION AND APPLICATION OF THE PROVISIONS OF THE CONTRACTS, SUCH DISPUTE OR DIFFERENCE SHALL BE REFERRED BY EITHER PARTY TO THE ARBITRATION OF ONE OF THE ARBITRATIONS IN THE DEPARTMENT OF PUBLIC ENTERPRISES TO BE NOMINATED BY THE SECRETARY TO THE GOVT. OF INDIA, INCHARGE OF THE BUREAU OF PUBLIC ENTERPRISES. THE ARBITRATION ACT, 1940, SHALL NOT BE APPLICABLE TO THE ARBITRATION UNDER THIS CLAUSE. THE AWARD OF THE ARBITRATOR SHALL BE BINDING UPON THE PARTIES TO THE DISPUTE, PROVIDED HOWEVER, ANY PARTY AGGRIEVED BY SUCH AWARD MAY MAKE A FURTHER REFERENCE FOR SETTING ASIDE OR REVISION OF THE AWARD TO THE LAW SECRETARY, DEPTT. OF LEGAL AFFAIRS, MINISTRY OF LAW AND JUSTICE, GOVT. OF INDIA. UPON SUCH REFERENCE THE DISPUTE SHALL BE DECIDED BY THE SECRETARY WHEN SO AUTHORISED BY THE LAW SECRETARY, WHOSE DECISION SHALL BIND PARTIES FINALLY AND CONCLUSIVELY. THE PARTIES IN THE DISPUTE WILL SHARE EQUALLY THE COST OF ARBITRATION AS INTIMATED BY THE ARBITRATOR."

7] Before we proceed to consider the meaning

and purport of the above referred arbitration clause, it

would be necessary, at this stage, to take a note of the

(Judgment) 1509 MCA 243-2017 5/13

fact that the agreement dated 22/07/2014 has been

entered into between the applicant and the respondent

in the respective capacities as a public sector enterprise

and a private party.

8] A bare perusal of the above referred

arbitration clause would be enough for us to understand

that any dispute or question or difference arising

between the applicant and the respondent with regard to

or in relation to or in connection with the offering of the

consultancy services by the applicant to the respondent,

has to be perforce referred by either of the parties

to the arbitration of one of the Arbitrators in the

Department of Public Enterprises to be nominated by

Secretary to the Government of India, in-charge of the

Bureau of Public Enterprises. The arbitration clause, no

doubt, makes a reference to the provisions of

Department of Public Enterprises notification dated

30/06/1993 in terms that whenever a dispute in

connection with the contract or work orders arises

between the parties to this agreement, the provisions of

this notification shall be applicable, but at the same

(Judgment) 1509 MCA 243-2017 6/13

time, this clause also specifically reproduces the

particular provisions of this notification which are made

applicable to the dispute arising between the parties

with regard to or in relation to or in connection with the

consultancy services offered by the applicant. So,

ultimately, what has to be seen in the present case, is not

the entire notification dated 30/06/1993, but it's

applicable provisions which are so specifically

reproduced or incorporated in the arbitration clause (10)

and I have already stated that this arbitration clause

(10) makes a dispute between the parties arising in

connection or in relation to the work orders as

arbitrable.

9] The notice dated 16/08/2016 sent by the

applicant to the respondent indicates that the dispute

was raised by the applicant with the respondent and a

demand was also made by the applicant for payment of

it's bills mentioned in the notice. It is also seen from this

notice that the applicant had made a request to the

respondent that in case the respondent failed to make

the payment, the applicant would invoke the arbitration

clause and take an appropriate legal action. This notice

(Judgment) 1509 MCA 243-2017 7/13

was replied too, by sending a reply dated 08/09/2016 by

the respondent. In para no.8 of the reply, it was stated

that before any reference of the dispute was made to the

Arbitrator, it was necessary that both the parties consult

each other and decide the matter amicably. It was also

stated that if the matter could not be resolved in this

way, there would be a real arbitrable dispute warranting

its referral to the arbitration. So, even the reply given by

the respondent nowhere states that agreement does not

contain any arbitration clause, rather the reply admits of

its existence. The only rider placed in the reply was that

arbitration would be inevitable only when mutual

consultation failed. In the present case, it is not the

stand of the respondent that there was any attempt at

mutual consultation which failed eventually. It is also

not the case of the respondent that the applicant was

invited to mutual consultation, but the applicant refused

to submit himself to any consultation process. This

would mean that consultation process, which was to be

resorted to first, as contended by the respondent, failed

even before it began. Therefore, I am of the view that it

can be reasonably inferred that there has been a failure

(Judgment) 1509 MCA 243-2017 8/13

of the mechanism provided for invoking the arbitration

clause and appointment of Arbitrator. As such this Court

will have to proceed in the matter in accordance with it's

power under Section 11(6) of the Arbitration and

Conciliation Act, 1996.

10] Coming to the case laws relied upon by the

learned counsel for the respondent, with due respect, I

may say that they would have no application to the facts

of the instant case.

11] In the case of Eastern Coalfields Ltd. -Vs-

Sanjay Transport Agency and another (supra), both

the parties were not Public Sector Enterprises or

Government Department. The arbitration clause in that

case provided for reference to arbitration of a dispute

which existed between the Departments of Public Sector

Enterprises inter-se or between the Public Sector

Enterprises and the Government Department. It did not

envisage reference of a dispute to an arbitration, which

was between a Public Sector Enterprise on the one hand

and a private party on the other hand. Therefore, the

(Judgment) 1509 MCA 243-2017 9/13

Hon'ble Supreme Court held that, the dispute in that

case would have to be decided by a Civil Court.

12] In the case of Northern Coalfields Ltd. -Vs-

Heavy Engineering Corporation Ltd. (supra), the rival

parties to the dispute were the Public Sector Enterprises.

There was also a settlement of the dispute between them

in terms of the permanent machinery for arbitration as

early as in the year 1993-94. The date on which the

dispute was referred to arbitration, the Committee on

Dispute (COD) was already set up, but it's permission

was not taken for reference of dispute for arbitration.

The award made by the Arbitrator was not accepted by

the appellant therein. The appellant therein filed a Civil

Suit No. 1709/2000 claiming a declaration that the

contracts were rendered null and void on account of the

breach of clause (3) of the contract and further

declaration that the respondent company was not

entitled to claim any relief under those contract nor was

respondent no.2 therein was entitled to do so and that

the so-called Arbitral award was vitiated on the face of

the record, and as such liable to be set aside. The plaint

(Judgment) 1509 MCA 243-2017 10/13

of the suit was rejected by the High Court on the ground

that before the institution of the suit, permission from

the Committee of Dispute was not obtained. The Hon'ble

Supreme Court held that, although a direction given by

the Apex Court in the case of ONGC Group of cases was

made the basis by the High Court for rejecting the plaint,

the direction could not have been understood to mean as

though absence of permission of COD was a fatal defect,

which was not. At the most, the suit could not have been

proceeded for, so held the Hon'ble Supreme Court.

These facts are entirely different from the facts in this

case which are discussed earlier, and therefore, this case

would have no application to the facts of the instant

case.

13] In the case of Saipem Triune Engineering

Pvt. Ltd. -Vs- Indian Oil Petronas Pvt. Ltd. (supra), the

learned Single Judge of Delhi High Court relied upon the

portion of ratio of case of Eastern Coalfields Ltd. -Vs-

Sanjay Transport Agency and another (supra) to

interpret Article-31 of the Format of agreement of

Project Management Services and accordingly, it

(Judgment) 1509 MCA 243-2017 11/13

concluded that since one of the parties to the agreement

was a Private Company, no reliance could be placed

upon the arbitration clause, which provided for reference

of dispute to arbitration only when the dispute was

between the Public Sector Enterprises inter-se or in

between Government Department and Public Sector

Enterprises. In the present case there is an arbitration

clause specifically providing for reference of dispute

between the applicant and the respondent to the

arbitration and these facts being different from the facts

of the said case of Saipem Triune Engineering Pvt. Ltd.

-Vs- Indian Oil Petronas Pvt. Ltd. (supra), I do not

think that it would provide any useful assistance to the

defence of the respondent.

14] The case of Engineering Projects (India)

Ltd. -Vs- Steel Authority of India Ltd. (supra), was

about a dispute which had arisen between two Public

Sector Enterprises, which is not a case here, and

therefore, this case, in my humble opinion, would not be

applicable to the facts of the present case.

 (Judgment) 1509  MCA 243-2017                                                                        12/13

                                15]           In   the   result,   I   find   that   this   application

deserves to be allowed and it is allowed accordingly.

16] The dispute between the parties shall be

referred to the arbitration.

17] Both the parties may suggest the name of a

Retired District Judge to be appointed as Arbitrator

which name is mutual acceptable. They may file a pursis

suggesting one or two name/s of a Retired District Judge

from the panel of Arbitrators to be appointed as

Arbitrator, within two weeks from the date of the order.

18] Both the parties shall deposit amount of

Rs.10,000/- each, as processing fees within two weeks

from the date of the order.

19] If the applicant fails to deposit amount of

Rs.10,000/- within the stipulated time, this reference

application shall stand dismissed without any reference

to this Court.

 (Judgment) 1509  MCA 243-2017                                                                          13/13

                                20]           If the respondent fails to deposit amount of

Rs.10,000/- within stipulated time, the respondent shall

be liable to pay penal interest at the rate of 2% per

month on the amount of Rs.10,000/-, which shall be

payable by the respondent to the applicant, upon

adjudication by the Arbitrator, irrespective of the result

of the arbitration.

                                21]           No costs.



                                22]           Rule is made absolute in the above terms.




                                                                                    JUDGE 
                               Yenurkar