Design Team Consultants (P) Ltd. vs Salar Jung Museum And Anr.
2002 Latest Caselaw 1454 Del

JUDGMENT

K.S. Gupta, J.

1. Petitioner filed this petition under Section 11(4) of the Arbitration & Conciliation Act, 1996 (for short the 'Act'), inter alia, alleging that it is a consultancy concern specialising in the field of architecture and interior designing etc. It was previously working under the name and style of M/s. Design Team and had entered into an agreement dated 17th January, 1991 also containing arbitration clause being No. 14 with respondent No. 1. Under this agreement, the fee chargeable by the petitioner for the building to be constructed for Salar Jung Museum, Hyderabad was to be at the rate of 4% of the approved preliminary cost estimate. Vide letter No. II-15/(iii)/91-92-385 dated 21st May, 1991, the respondent No. 1 informed the petitioner that it had approved the preliminary cost estimate of the building at Rs. 10.52 crores. It is further alleged that petitioner completed 60% of the work in three phases but the payment made by respondent No. 1 was calculated at the rate of 4% on the cost estimate of Rs. 5.94 crores submitted prior to said approved estimate cost of Rs. 10.82 crores. Petitioner was, thus, paid less amount by Rs. 10,98,800/- which was accepted under protest. Respondent No. 1 unilaterally reduced the cost from rs. 10.52 crores to Rs. 7.5 crores as conveyed through letter No. 15(iii)/94-11 dated 4th January, 1994. Remaining 30% work was completed by the petitioner at the estimated cost of Rs. 7.5 crores and for balance 10% work, bills are still to be raised. Fee at the rate of 4% calculated on Rs. 7.5 crores came to Rs. 2,97,200/- but again payment was made at the said estimated cost of Rs. 5.94 crores. Respondent No. 1, thus, made less payment by Rs. 1,87,000/- which was accepted by the petitioner under protest. Aggrieved by less payment of total amount of Rs. 12,86,400/-, the petitioner sent a letter dated 27th October, 1993 to respondent No. 1 which was followed by reminders dated 17th July, 1998, 21st April, 1999 and 19th August, 1999. Respondent No. 1 gave reply vide letter No. SJM 5-3673 dated 19th August, 1999 saying that payment is to be made only at the estimated cost of Rs. 5.94 crores. It is also alleged that petitioner issued notice dated 3rd January, 2000 through counsel to which reply dated 17th January, 2000 was sent through counsel by respondent No. 1. In the reply, respondent No. 1 took the objection that M/s. Design Team Stood replaced by Design Team Consultants (P) Ltd. w.e.f. 20th September, 1996 but there was no renewal of the agreement/contact dated 17th January, 1991 with Design Team Consultants (P) Ltd. Vide letter dated 4th April, 2000 sent through counsel, it was explained that Design Team Consultants (P) Ltd. was re-constitution/Substitution of M/s. Design Team and the said notice dated 3rd January, 2000 be read as having been served by Design Team Consultants (P) Ltd. Respondent No. 1 sent reply dated 11th April, 2000 again persisting in the stand taken in the reply dated 17th January, 2000. It was prayed that an independent arbitrator for adjudication of the claims of the petitioner, be appointed.

2. Respondents filed reply on the affidavit of Dr. A.K.V.S. Reddy, Director of respondent No. 1-Museum. It is alleged that proposal to raise additional building to display the objects after approval was conveyed by the Ministry of HRD vide letter No. F.3-2/87/CH.5 dated 16th October, 1989. It was decided on 24th February, 1990 to entrust the construction of building to NBCC, a Central Government undertaking. For preparation of drawings and supervision over construction, M/s. Design Team, a partnership firm comprising of Sunil Saini, Susheel Agarwal and Chandra Mohan was selected. An agreement with the said firm was finalised on 17th January, 1991 and professional fee of 4% was agreed to be paid on the estimated cost of Rs. 5,94 crores. Estimated cost of Rs. 10.52 crores was never accepted/approved by the SJM Board at any time. Site for construction was handed over to NBCC on 15th February, 1992. In view of delay in execution of construction work, the Central Government after reviewing the matter had taken the decision in the meeting held on 28th July, 1993 that final outlay would not exceed Rs. 7.52 crores as a whole which was confirmed by the decision of SJM Board vide para No. 4 of Resolution No. III-45/93-94 dated 18th August, 1993. On 18th December, 1993, M/s. Design Team was intimated about the said decision. However, this decision has no connection whatsoever with the estimated cost of Rs. 5,94 crores for the purpose of professional fee paid to the said firm. Contract with M/s. Design Team which expired on 16th January, 1996, was not renewed thereafter. It is further alleged that on 20th September, 1996, Sunil Saini intimated respondent No. 1 that M/s. Design Team had been wound up and a new company styled as Design Team Consultants Pvt. Ltd. has been floated and the company is prepared to execute the balance work. Said Sunil Saini carried out the balance work and he was paid at the rate of 4% and the building was handed over on 31st December, 1998. It is claimed that the petitioner is a company with distinct status and identity and present petition is misconceived. It is also alleged that contract was executed at Hyderabad; payments to M/s. Design Team were also made there and the fact that arbitrator would sit at Delhi as provided under Clause 14 of the said agreement, has no relevance as regards territorial jurisdiction of this Court to try the petition.

3. In the rejoinder filed to the reply, it is claimed that the agreement dated 17th January, 1991 was executed at Hyderabad House, New Delhi and payments under the contract were also made in Delhi.

4. Submission advanced by Sh. R.S. Murthy for respondents was that to fasten liability on respondents, the status change in M/s. Design Team warranted execution of a fresh agreement with arbitration clause but no agreement was ever executed in between Design Team Consultants Pvt. Ltd. and respondent No. 1 or any payment made to the former by the later. Admittedly, M/s. Design Team was engaged by respondent No. 1 to prepare drawings and supervise construction work under the agreement dated 17th January, 1991, currency whereof came to an end on 16th January, 1996. Petitioner alleges that pursuant to change in status of M/s. Design Team to Design Team Consultants Pvt. Ltd., entire assets and liabilities of the former were taken over by the latter w.e.f. 20th September, 1996. Copy of said agreement is placed on part-III file. Preamble to this agreement which is material, runs as under:-

"Memorandum of agreement, made this day of January 17, 91 between the Chairman, Salar Jung Museum Board (hereinafter referred to as employer) which expression shall unless excluded by or repugnant to the context be deemed to include their successors, and assigns in office) of the one part and M/s. Design Team having its office at W-139, First Floor, Greater Kailash Part-I, New Delhi - 110048 (hereinafter referred to as the consultant, which expression shall unless excluded by or repugnant to the context, be deemed to include their successors and assigns) of the other part.

Whereas the employer is desirous of undertaking the construction of Building in accordance with the general requirements as set out in the enclosed conditions; and whereas the consultant have agreed to perform the services as set out in the enclosed conditions upon and subject to the terms and conditions set forth in the said 'conditions'.

Now, these present witnessth and it is hereby agreed and delivered by between the parties hereto as follows...:"

5. In the definitions given under the heading 'Conditions of Agreement' in Clause (ii) and (iv), words 'Employer' and 'Consultant' have been defined thus:-

"(ii) Employer means the Chairman, Salar Jung Museum Board, which expression shall unless excluded by or repugnant to the context include Employer's representative.

(iv) Consultant means M/s. Design Team or their assigns or successors in office and authorized authorized representative."

6. Copy of letter dated 19th September, 1996 sent by three partners of M/s. Design Team filed by the respondents Along with list of documents dated 2nd September, 2000, would indicate that the partners of said firm had intimated the Director of respondent No. 1 about change of status of M/s. Design Team to Design Team Consultants Pvt. Ltd. as also the fact that the agreement/contracts which were signed by M/s. Design Team, are being taken over by Design Team Consultants Pvt. Ltd. Copy of the minutes of meeting of Board of directors of Design Team Consultants Pvt. Ltd. dated 28th August, 1996 enclosed with the said letter, would further show that in said meeting it was resolved to take over all existing assets and liabilities of the business of partnership firm -- M/s. Design Team by Design Team Consultants Pvt. Ltd. w.e.f. 16th September, 1996. In view of preamble and definition of 'Consultant' in the agreement reproduced above, the Design Team Consultants Pvt. Ltd. being assigns/successors in office of M/s. Design Team would step into the shoes of M/s. Design Team w.e.f. 16th/20th September, 1996 on which dated existing assets and liabilities of M/s. Design Team were decided to be taken over by Design Team Consultants Pvt. Ltd. and the said agreement dated 17th January, 1991 will be deemed to have been transferred to Design Team Consultants Pvt. Ltd., petitioner. Thus, for availing of arbitration Clause No. 14, the execution of fresh agreement in between respondent No. 1 and petitioner was not needed. Submission referred to above advanced on behalf of respondents is, therefore, repelled being without any merit. Decision in Hiralal Pannalall v. Dalhousie Jute Co. Ltd., has no applicability to the facts of this case. Since respondents have failed to appoint arbitrator to adjudicate the petitioner's claim for Rs. 12,86,400/- with interest despite receipt of aforesaid communications dated 3rd January, 2000 and 4th April, 2000, an arbitrator deserves to be appointed by the Court to adjudicate the said claim.

7. For the foregoing discussion, while allowing petition, Justice R.P. Gupta (Retd.) is appointed as sole arbitrator to adjudicate the claim referred to in the preceding paragraph. He will make the award in accordance with law. His fee shall not exceed Rs. 75,000/- which will be borne equally by both the parties.

8. Parties are directed to appear before the arbitrator on 23rd September, 2002 at 10.30 AM. Registry will ensure that a copy of this order is sent to the arbitrator expeditiously.