Tarsem Lal vs Usha Rectifier Corporation And ...
1996 Latest Caselaw 33 Del

JUDGMENT

K. Ramamoorthy, J.

(1) The Petitioner Shri Tarsern Lal, Proprietor of M/s. Tarsem Lal & Co. entered into contract with M/s. Usha Rectifier Corporation (India) Ltd. for the execution of the work of "construction of factory building on Plot Nos. 486/487-Phase Iii, Sector 20, Udyog Vihar, Gurgaon.

(2) Disputes arose between the parties and they were referred for an adjudication to Shri J.R. Bhalla, Arbitrator. The Arbitrator has made his award on 6.12.1989 directing M/s Usha Rectifier Corporation (India) Ltd. to pay to the Petitioner a sum of Rs. 11,66,047.00 with interest @ 12% p.a. from 8.8.1987 till 13.7.1989. He further directed that if the amount is not paid within 30 days Respondent No. 1 shall pay further interest @ 15% per annum from the date of award till the date of payment. Respondent No. 1/Objector did not appear before the learned Arbitrator, therefore, the award was passed exparte.

(3) Respondent No. 1 has filed the objections (IA No. 4412/90). In the objection petition the point taken is that under Clause 56 of the contract, the Arbitrator was not appointed in accordance with that clause therefore, the Arbitrator had no jurisdiction to adjudicate upon the disputes between the parties.

(4) The second objection that was taken that the Award was not passed within four months from the date the Arbitrator entered upon the reference therefore, the award is not valid and it is without jurisdiction. The relevant portion of Clause 56 reads as follows: "CLAUSE56 - But if either the owner or the Contractor be dissatisfied with the decision of the Consulting Engineer on any matter, question or dispute of any kind (except any of the excepted matters) or as to the withholding by the Consulting Engineer of any certificate to which the Contractor may claim to be entitled then and in any such case either party (the owner or the Contractor) may within 28 days after receiving notice of such decision give a written notice to the other party through the Consulting Engineer requiring that such matters in dispute be arbitrated upon. Such written notice shall specify the matters which are in dispute and such dispute or difference of which such written notice has been given and no other shall be and is hereby referred to the arbitration and final decision of a single Arbitrator of a technical back ground to be agreed upon and appointed by both the parties or in case of disagreement as to the appointment of a single Arbitrator to the arbitration of two Arbitrators of technical back ground one to be appointed by each party and the Arbitrators shall before taking upon themselves the burden of reference appoint an Umpire".

(5) The Petitioner on 26.04.1989 wrote to the Consulting Engineer as per the provision of the contract for the settlement of the disputes. On 10.5.1989 it appears that the Objector cancelled the appointment of the Consulting Engineer. This was after receipt of the notice. The Objector did not act according to the terms of the contract and, therefore, the Petitioner sent a letter dated 7.6.1989 to the Arbitrator Shri J.R. Bhalla as its Arbitrator and called upon the Objector to nominate its Arbitrator. By a letter dated 22.6.1989 the Objector had sent a reply that the course adopted by the Petitioner is not acceptable and it did not nominate its Arbitrator. On 7.7.1989 the Petitioner sent a reply staling that inasmuch as the Objector did not nominate its Arbitrator, Mr. J.R. Bhalla became the Sole Arbitrator to adjudicate upon the disputes. On 13.7.1989, Shri J.R. Bhalla accepting the assignment called upon the parties to file their respective claims. He has stated that he would enter upon the reference after the parties have filed their claims. On 30.7.1989, the Petitioner presented its statement of claims. On 14.8.1989, the Counsel for the Objector wrote to the Counsel for the Petitioner in the following terms : This is in furtherance of my client's telegram dated 22.6.1989. At the outset, I would like to draw your attention to the Arbitration Clause i.e. Clause 56 of the general conditions of contract, the relevant part of which is reproduced hereunder: "BUT if either the owner or the contractor be dissatisfied with the decision of the Consulting Engineer on any matter, question or dispute of any kind (except any of the excepted matters) or as to the withholding by the Consulting Engineer of any certificate to which the Contractor may claim to be entitled then and in any such case either party (the owner of the contractor) may within 28 days after receiving notice of such decision give a written notice to the other party through the Consulting Engineer requiring that such matters in dispute be arbitrated upon. Such written notice shall specify the matters which are in dispute and such dispute or difference of which such written notice has been given and no other shall be referred to the arbitration......."

Vide telegram dated 10.5.1989, my clients had appointed M/s. Cambow Associates Pvt. Ltd as Consulting Engineers for the purposes of the construction contract. The telegram was duly received by the earlier Consulting Engineers M/s. Benjamin & Benjamin as well as by your clients M/s. Tarsern Lal & Co. No objection was received to appointment of M/s. Cambow Associates Pvt. Ltd as Consultant Engineers either from M/s. Benjamin & Benjamin or from your clients and as such M/s. Cambow Associates Pvt. Ltd are the Consultant Engineers, muchless, w.e.f. 10.5.1989 for the purposes of construction contract. According to the arbitration clause, the relevant part of which is reproduced hereinabove, the pro-requisite and essential condition was to give a written notice requiring my clients to refer the alleged matters in dispute to Arbitrator only through the consulting Engineers. My clients did not receive any notice in terms of Clause 56 of the general conditions and as such my clients were under no obligation either to agree to sole Arbitrator as was suggested by you or to nominate their own Arbitrator, as the essential condition of arbitration clause was not complied with. Further you failed to give the notice to refer the matter to arbitration within 28 days as required under Clause 56 of the general conditions. In view of, act of your clients of appointment of an Arbitrator, either as a sole Arbitrator or their nominee Arbitrator is void ab-initio and if so appointed Arbitrator acts in pursuant to such appointment in any manner whatsoever, his every act would be without jurisdiction. In view of, my clients dispute the jurisdiction of Shri J.R. Bhalla to act as an Arbitrator in the matter and also refuse to submit to his jurisdiction. However, my clients are ready and willing to refer any matter in dispute to Arbitrator, if covered within the ambit of arbitration agreement, and also to nominate their Arbitrator on receipt of notice through Consulting Engineers as required under Clause 56 of General Conditions of Contract. In any event, my clients are not agreeable to sole arbitration. I would like to put that if my client s suffer any loss or injury of any I would like to put it record that if my clients suffer any loss or injury or injury of any nature whatsoever because of your client's such unauthorised act or because of any of the act of the Arbitrator, your client will be liable to reimburse my client for the same."

(6) On 25.8.1989, learned Counsel for the petitioner sent a reply to the letter dated 14.8.1989: "AS an Advocate of my clients M/s. Tarsem Lal & Co. CR-213, Lalita Park, Laxmi Nagar, Delhi the receipt of your letter dated 14.8.89 issued by you on behalf of M/s. Usha Rectifiers Corporation (India) Ltd., Jeevan Tara Bidg., 5 Parliament St., New Delhi is acknowledged and reply thereto is given as under:

(7) The contents of your letter only reveal as if you have not been briefed correctly with the complete facts and your clients have briefed you only in a distorted manner so as to create a confusion and avoid its liability. The reproduction of part of Clause 56 and starting the events from 10.5.89 onwards is only part of your clients strategy to create confusion and make an attempt to delay the determination of their liability on which they are otherwise quite aware. The appointment of M/s. Cambow Associates Pvt. Ltd. as Consulting Engineer on 10.5.89 after terminating the appointment of Benjamin & Benjamin (Consulting Engineer) was also an attempt with dishonest intentions to avoid delay their liability. The work executed and payable in the last bill was duly certified on 26.5.87 by the Consulting Engineer - Benjamin & Benjamin in terms of the contract. Your reference to appointment of M/s. Cambow Associates (P) Ltd. is without any relevance.

(8) That initially so as to comply with the pre-requisite and essential condition of Clause 56 of General conditions, my clients through a notice dated 26.4.89 issued by me addressed to the Consultants M/s Benjamin & Benjamin with a copy to your clients had sought decision with respect to 5 Nos. of claims enclosed therewith. The said notice stands duly received by your clients as well as the Consultants around 2.5.89. In the said notice, it was made clear that if no decision is received from the Consultants within three weeks, it shall be presumed that they have no decision to make. No such decision have been received within three weeks, my clients in furtherance of Clause 56 vide their letter dated 7.6.89 issued by me on their behalf appointed Shri J.R. Bhalla, Architect as an Arbitrator and requested your clients to nominate their nominee Arbitrator within the statutory period of 15 clear days after receipt of the letter. Since, your clients failed to nominate their co-Arbitrator within the statutory period, Shri J.R. Bhalla became sole Arbitrator in terms of Section 9 of Arbitration Act, accordingly I vide my letter dated 7.7.89 addressed to Shri J.R. Bhalla with a copy to your clients appointed Shri J.R. Bhalla as sole Arbitrator and requested him to proceed with the matters. The notice to refer the matter to arbitration was done well within 28 days after the expiry of three weeks of time given to the Consultants for giving their decision. The aforesaid facts would reveal that provision of Clause 56 have been strictly complied with and the appointments of Shri J.R. Bhalla, as sole Arbitrator is perfectly in order as per law.

(9) That now as the position stands, Shri J.R. Bhalla, is the sole Arbitrator for deciding the disputes/claims which had arisen between the parties in relation to the work/contract of Construction of Factory building for M/s Usha Rectifiers on Plot No. 486/487 Ph. Iii Udyog Vihar, Gurgaon. Your clients not submitting the jurisdiction of Shri J.R. Bhalla shall only result in making them face the consequences of not doing so before a validly Arbitrator in terms of contract and law.

(10) That the arbitration proceedings have already started and my clients have already filed their statement of claims with documents before the learned Arbitrator with a copy to your clients. It would be appreciated if you may advise your clients to leave the approach of resorting to tactics of delaying the determination of their liability so as to avoid it to the extent it can be managed. "

(11) On 25.5.1989 the Arbitrator recorded the minutes of the proceedings giving an opportunity to the objector to file a reply. On 6.10.1989, the Arbitrator issued notice for the first hearing of the arbitration proceedings. According to the Petitioner the Arbitrator entered upon the reference on 16.10.1989. As the Objector did not participate in the hearing, the hearing concluded on 30.10.1989 and the award was passed on 6.12.1989. Section 9 of the Arbitration Act, 1940 reads as follows: "9.Power to party to appoint new Arbitrator or in certain cases, a sole arbitrator.-Where an arbitration agreement provides that a reference shall be to two Arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement (a) if either of the appointed Arbitrators neglects or refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new Arbitrator in his place; (b) if one party fails to appoint an Arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear days, after the service by the other party of a notice in writing to make the appointment such other party having appointed his Arbitrator before giving the notice, the party who has appointed an Arbitrator may appoint that Arbitrator to act as sole Arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent : Provided that the Court may set aside any appointment as sole Arbitrator made under Clause (b) and either, on sufficient cause being shown allow further time to the defaulting party to appoint an Arbitrator or pass such other order as it thinks fit."

(12) The Petitioner had acted in accordance with these provisions and the sole Arbitrator had the authority to adjudicate upon the disputes. It is not open to the Objector on the facts and circumstances of this case to contend that the Arbitrator had no jurisdiction to adjudicate on the disputes on the ground that he was not appointed in accordance with Clause 56 of the contract.

(13) Learned Counsel for the Objector drew my attention to the decision in Satya Narayan Agganval v. Baidyanath Mandal & Ors., , and Ghasilal Todi v. Biswanath Kewrwal & Ors., for the proposition that the award passed beyond four months period is not valid in law.

(14) On the facts-and circumstances of the present case, I do not think those cases are of any assistance on the question of passing of the Award within four months. I do not want to enter into the controversy. I condone the delay, if any, in passing the award and time stands extended upto 10.12.1989. Therefore, the second objection raised by the Objector has no force.

(15) The decision in M/s. Bright Wire & Steel Industry v. Uoi, , Gujarat Water Supply and Sewerage Board Gandhi Nagar v. M/s. Unique Erectors (Gaj) Pvt. Ltd. Ahmedabad and Anr., were referred to for the purpose of explaining the position as to when the Arbitrator is deemed to have entered upon the reference. Inasmuch as, I have extended the time under Section 28 of the Arbitration Act, 1940, there is no need to go into the question in detail. Accordingly, the award passed by the Arbitrator is confirmed.

(16) There shall be a decree directing M/s Usha Rectifier Corporation (Indian) Ltd. (Respondent No.1) to pay the petitioner a sum of Rs. 11,66,047.00 (Rupees Eleven Lakhs Sixty Six thousand and Forty-seven only) with interest @ 12% per annum thereon from 8.8.1987 till 13.7.1989 and @ 15% from the date of award (16.12.1989) upto the date of realisation.