Calcutta High Court
Civon Construction Pvt. Ltd vs Ircon International Limited on 28 January, 2022
IN THE HIGH COURT AT CALCUTTA
ORIGINAL CIVIL JURISDICTION
(Original Side)
A.P. No. 413 of 2020
(Through Video Conferencing)
Reserved on: 04.01.2022
Pronounced on: 28.01.2022
CIVON CONSTRUCTION PVT. LTD.
....Applicant(s)
Through : Mr. S. Sen,
Mr. T. Singha Roy, Advocates
v/s
IRCON INTERNATIONAL LIMITED
....Respondent(s)
Through : Mr. J. Banerjee,
Mr. B.K. Saha,
Mr. J. Datta,
Mr. A. Mondal, Advocates
Coram : HON'BLE MR. JUSTICE PRAKASH SHRIVASTAVA,
CHIEF JUSTICE
Prakash Shrivastava, C.J.:
1. This application under Section 11(6) of the Arbitration and Conciliation
Act, 1996 has been made by the applicant for appointment of sole arbitrator to
resolve the dispute.
2. Undisputedly, the Letter of Acceptance dated 03rd May, 2016 was issued
by the respondent in favour of the applicant accepting the tender and awarding the
contract for the work specified in Clause 2 of the LOA. The dispute had arisen
between the parties, therefore, in terms of general conditions of contract, applicant
had exhausted the remedy of settlement and conciliation. The relevant clause
relating to arbitration is as under:
"73.2 Conciliation/Arbitration
73.2.1 It is a term of this contract that Conciliation/Arbitration of
disputes shall not be commenced unless an attempt has
first been made by the parties to settle such disputes,
within 120 days of submission of monthly statement of
such claim, through mutual settlement.
73.2.2 In the event of failure to resolve any dispute or difference
between the parties hereto as to the construction or
operation of this contract, or the respective rights and
liabilities of the parties on any matter in question, dispute
or difference on any account or as to the withholding by
the Employer of any certificate to which the contractor
may claim to be entitled to, through mutual settlement,
the Contractor may refer such matters to the Chairman
and Managing Director in writing within 60 days from the
date of failure of amicable settlement of such disputes or
differences for settlement through Conciliation.
If the efforts to resolve all or any of the disputes through
Conciliation fails, the Contractor may refer to the
Chairman and Managing Director of the Employer for
settlement of such disputes or differences through
Arbitration. No disputes or differences shall be referred to
Arbitration after expiry of 60 days from the date of
notification of the failure of Conciliation.
73.2.3 The demand for Conciliation or Arbitration shall specify
the matters which are in question, or subject of the
dispute or difference as also the amount of claim item
wise. Only such dispute (s) or difference (s) in respect of
which the demand has been made, together with counter
claims or set off, given by the Employer, shall be referred
to Conciliation or Arbitration and other matters shall not
be included in the reference.
73.2.3(1) The Arbitration proceeding shall be assumed to have
commenced from the day, a written and valid demand for
arbitration is received by the Employer.
93.4(a)(i) Sole Conciliator/Sole Arbitrator:
In cases where the total value of all claims/counter-claims
in question added together does not exceed Rs. 2.00 Crore
(Rupees Two Crores), the Arbitral Tribunal shall consist
of a sole arbitrator who shall be an officer of IRCON not
below GM level, nominated by the Chairman and
Managing Director.
The sole arbitrator shall be appointed by the Chairman
and Managing Director of the Employer within 60 days
from the day when a written and valid demand for
arbitration is received by the Employer.
73.4(a)(ii) Arbitration Tribunal:
In cases where the total value of all claims/counter-claims
exceeds Rs. 2.00 Crore, the Arbitral Tribunal shall sonsist
of a panel of three Officers not below GM level.
For this purpose, the Employer will send a panel of more
than 3 names to the contractor, within 60 days from the
day when a written and valid demand for arbitration is
received by the Employer. Contractor will be asked to
suggest to the Chairman and Managing Director atleast 2
names out of the panel for appointment as the contractor's
nominee within 30 days from the date of dispatch of the
request by the Employer. The Chairman and Managing
Director shall appoint at least one out of them as the
contractor's nominee and will, also simultaneously
appoint the balance number of arbitrators either from the
panel or from outside the panel, duly indicating the
'presiding arbitrator' from amongst the 3 arbitrators so
appointed. The Chairman and Managing Director shall
complete this exercise of appointing the Arbitral Tribunal
within 30 days from the receipt of the names of
contractor's nominees. While nominating the arbitrators it
will be necessary to ensure that one of them is from the
Accounts Department. An officer of AGM rank of the
Accounts Department shall be considered of equal status
to the GM of the other departments of IRCON for the
purpose of appointment of arbitrator.
3. In the present case, the value of claim is stated to be more than Rs. 2
Crores, therefore, Clause 73.4.a(ii) is relevant. The above clause empowers the
employer to sent panel of more than 3 names to the Contractor and gives option to
the Contractor to suggest to the Chairman and Managing Director at least 2 names
out of the panel and gives power to the Chairman and Managing Director to
appoint at least one out of them as Contractor's Nominee and to appoint the
balance number of arbitrators either from the panel or from outside the pane. It
further provides that one of the arbitrator will be from the Accounts Department.
The arbitral panel is to consist of a panel of 3 Officers of the respondent, therefore,
in terms of Section 12(5) of the Act, the said panel is not eligible to arbitrate the
matter. There is nothing on record to show that the parties had waived of the
applicability of Section 12(5) of the Act by any agreement in writing.
4. Learned Counsel for the respondent has placed reliance upon the
judgment of the Hon'ble Supreme Court dated 17th December, 2019 in CA No.
9486-9487 of 2019 in the matter of Central Organisation for Railway
Electrification vs. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company
but in that case, the modified Clause 64(3)(a)(ii) and 64(3)(b) of the GCC was
under consideration where the Arbitral Tribunal was to consist of a panel of three
retired railway employees but that is not so in the present case.
5. In view of the judgment of the Hon'ble Supreme Court in the matter of
TRF Limited Vs. Energo Engineering Projects Limited, (2017) 8 SCC 377 and
in the matter of Perkins Eastman Architects DPC Vs. HSCC (India) Limited,
2019 SCC OnLine SC 1517, under Clause 73.4(a)(ii), the Chairman and
Managing Director is no longer competent to appoint the panel of 3 Officers of
the respondent out of which, one was to be from the Accounts Department. Clause
73.4(a)(ii) does not state that this panel will be of retired employee, on the
contrary, it indicates that the Arbitral Tribunal will consist of 3 Officers not below
GM level meaning thereby working officers are to be the members of the Arbitral
Tribunal. Hence, Chairman and Managing Director had become ineligible to
appoint the arbitral panel in terms of Clause 73.4(a)(ii).
6. The next objection raised by the respondent is that no notice in terms of
Section 21 of the Act was served invoking Arbitration Clause. As per the
submission of learned Counsel for the applicant, the notice dated 18th December,
2020 was sufficient but a perusal of the said notice indicates that there was no
prayer therein for appointment of the sole arbitrator or panel of arbitrators nor any
name of proposed arbitrator was suggested therein. That apart, the stand of the
respondent is that the notice dated 18th December, 2020 was served upon the
applicant after filing of the present application under Section 11 of the Act which
was filed on 23rd December, 2020. Since the applicant has failed to give notice
invoking the Arbitration Clause, hence, the application under Section 11 is pre-
mature. Accordingly, A.P. is dismissed, however, with liberty to the applicant to
approach this Court again after giving due notice invoking the Arbitration Clause.
(PRAKASH SHRIVASTAVA)
CHIEF JUSTICE
KOLKATA
28.01.2022
PA(RB)
