Guruman Construction ... vs Municipal Corporation Of Delhi
2000 Latest Caselaw 1033 Del

JUDGMENT

Vikramajit Sen, J.

1. The petitioner has approached the Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, for the issuance of a direction to Respondent No. 1 to file the original Arbitration Agreement and for the appointment of an independent Arbitrator for adjudicating the disputes between the parties. The allegations in the plaint are that the petitioner made arrangements for commencing the work for the which the contract was given to it. The land was low-lying and due to non-filling up of earth on all sides of the basement and insufficient space for stacking of material, the labour was hindered. It has also been alleged that the Respondent delayed supplies of cement and steel and although bills were cleared payments were not made due to non-availability of funds with the Respondent. The 14th running bill, for a sum of Rs. 7,08,384/- was not paid and, therefore, the petitioner was forced to cease work in January 1999. The Respondent had unilaterally granted an extension of time upto 31.3.1999 in terms of its letter dated 30.11.1998. Demand for payments under Clause 10-CC of the Agreement was also raised. Another unilateral extension of time was granted by the Respondent upto 30.6.1999 by its letter dated 31.3.1999 and thereafter upto 30.9.1999 by its letter dated 22.7.1999. Although no payments have been made the petitioner has been threatened with forcible removal of building material, tools, plant, machinery etc. and demolition of the huts of the staff. The allegation is that the Respondents have illegally taken possession of the First Floor which is still incomplete. In these circumstances a letter dated 26.12.1998 was issued by the petitioner to the Respondent, calling upon them to appoint an Arbitrator. This was followed by another notice dated 22.6.1999 giving brief details of the claim and reiterating the request for the appointment of an Arbitrator. When this was also ignored, the petitioner was, therefore, left with no alternative but to file the present petition. The plaintiff has also prayed for the appointment of a Local Commissioner.

2. In opposition to the petition, a brief affidavit of the Executive Engineer, Municipal Corporation of Delhi has been filed. Various objections, of a preliminary nature have been raised. Firstly, it has been averred that the petition is barred by limitation. I am unable to appreciate any reason which would substantiate this objection. Admittedly, payments against even the 14th running bill, have till date not been made. The stage for the preparation of the Final Bill had not even arrived, as is evident from the Respondent's affidavit itself. The stipulation of ninety days, contained in Clause 25, would not apply because it is not a case where the petitioner had failed to make any demand on behalf of the bill made ready for payment. The grievance of the petitioner is that payments against the 14th running bill have not been made. Reminders in this regard have been sent and work was halted when no payments were forthcoming.

3. Secondly, it has been submitted that since the 14th running bill was accepted on 22.7.1998 no cause of action for the present petition had arisen. This facile objection calls for summary rejection. It will be significant to note that in paragraph four of the affidavit the Respondents have firstly stated that 14th bill had been prepared and in some paragraphs have called it as the finally bill. This confusion appears to have been deliberately caused in order to make out a semblance of a case for attracting the plea of limitation.

4. Thirdly, it has been urged that the petition calls for rejection since the petition has not been accompanied by the Arbitration Agreement. Arbitration Agreement is, however, not in dispute nor is it denied that an Agreement containing this Arbitration Clause had been signed. No precedent has been shown which would mandate the rejection of the petition merely because of the non-filing of the copy of the Agreement, when admittedly there is no disputes as to its existence. Significantly, Clause 25, the Arbitration Clause, has been reproduced in the affidavit of the Respondent-Corporation itself.

5. Fourthly, it is perfunctorily stated that the disputes raised by the petitioner are not covered by the Arbitration Agreement. No details have been furnished and no arguments substantiating this ground were made before me. In any event this question can be suitably adjudicated upon by the Arbitrator himself.

6. Fifthly, although notices have been received by the Respondent, the objection of Section 478 of the DMC Act has still been raised. How this provision applies in cases where the petitioner has duly complied with the terms of the Agreement, and the Arbitration Clause therein, has hot even been spelt out or clarified in the course of arguments.

7. On merits it has been submitted that the bill for Rs. 7,08,584/- has been passed for payment but has not been paid as the Contractor had stopped work and certain recoveries for material issues were to be made. This averment infact give sufficient sustenance to the maintainability of the petition and negates the preliminary objections raised by the Respondent. The submission that compensation under Clause 10-CC is payable only for work done during the stipulated period of contract should be raised before the Arbitrator who is in the best position to return a finding thereon. The Arbitration and Conciliation Act, 1996 invests the Arbitrator with the power to dispose off these contentions. Significantly the Respondents have reserved their right to invoke Clause 2 of the Agreement.

8. In these circumstances there is no justification, nor have any ground been disclosed, as to why the petitioner's request for the appointment of an Arbitrator was not acted upon by the Respondent. Instead, even in the proceedings before Court, the Respondents have sought to obstruct the Arbitral process. The scope of Section 11 of the Arbitration and Conciliation Act, 1996 has been recently spelt out by the Hon'ble Supreme Court in the decision rendered in Konkan Railway Corporation Ltd. and Ors. v. Mehul Construction Co., . It was observed in that case, inter alia, as follows:

"The nature and function performed by the Chief Justice or his nominee under Sub-section (6) of Section 11 being essentially to aid the constitution of the Arbitral Tribunal cannot be held to be judicial function as otherwise the Legislature could have used the expression 'court' or 'judicial authority' instead of choosing the expression 'the Chief Justice or his nominee'. While discharging the functions under Sub-section (6), the Chief Justice or his nominee will be acting in his administrative capacity and such a construction would subserve the very object of the new Arbitration Law.

It would be proper for the Chief Justice or his nominee just to appoint an Arbitrator without wasting any time or without entertaining any contentious issues at that stage, by a party objecting to the appointment of an Arbitrator."

9. In B.W.L. Ltd. and Ors. v. M.T.N.L. and Ors., I had observed as follows:

"It has now become commonplace for persons who have retained this power of appointment of an Arbitrator, not to act at all or to act with such obduracy as to render an Arbitration clause totally meaningless. The vehemence with which, the present petition was opposed, often caused me to forget that it was only the appointment of an Arbitrator to adjudicate upon the claims raised by both parties and not the disposal of Objections, that was in debate. After hearing lengthy arguments it would be an abdication of judicial duty if the Respondents were still permitted to make an appointment of the Arbitrator. The State is expected to act without arbitrariness and with fairness and in furtherance of the well-being of its citizens, It is also expected to know the law, especially as laid down by the Supreme Court, It cannot be excused if its action tantamount to emasculating the laws - i.e. of expeditious disposal of disputes through arbitration. Apart from the logistic consideration, i.e., encouraging vexatious and obdurate failure to act in accordance with and in conformity with the compact between parties, there is one further consideration which has persuaded me to make an appointment of an independent person as an Arbitrator. The decision to oppose the present petition has been taken by the very officer who is to act as the Arbitrator. He has already taken a view in the case and has issued instructions and then action for their implementation. The preponderance of likelihood is that he or his nominee would uphold his view. Having already decided held that the Department is justified in claiming liquidated damages, and having declined the petitioner's request for the appointment of an Arbitrator, there is a strong pervading risk that a fair decision would not be rendered. Since this Officer also have the power to nominate an Arbitrator, presumably also in service, it is quite possible that his bias would permeate to his nominee. Justice has not only to be done but must also appear to be done. As observed above had the Respondents agreed to appoint an Arbitrator, albeit after some delay, I would have not felt compelled to appoint an Arbitrator de hors the Arbitration Clause. The decision of the Apex Court in Rajan's case would not have application to the present circumstances in view of the recalcitrant refusal of the Respondent to make an appointment of an Arbitrator."

10. In these circumstances I am satisfied that the petition is well founded. I accordingly appoint Mr. Justice H.C. Goel (Retd.), B-504, New Friends Colony, New Delhi -110 065 as the Arbitrator. On entering upon the Reference he shall issue notice to the parties. He shall be entitled to received a fee of Rs. 5000/- per hearing subject to a maximum of Rs. 50,000/- for the entire arbitration.

11. Learned counsel for the petitioner has undertaken to pay the fee of the learned Arbitrator in the first instance. The learned Arbitrator shall decide as to who is to pay the cost of the Arbitration at the conclusion thereof.

12. On 17.12.1999 I had ordered that status quo be maintained in respect of the structures and the material located at the site. Thereafter the Local Commissioner has visited the site and has submitted his report to which no objections have been filed. These Interim Orders shall continue till the first hearing before the learned Arbitrator who shall thereupon decide as to whether the Order of status quo should be modified or recalled, in his sole discretion.

13. The petition and all pending applications stand disposed of.